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U.S. automakers plan for future with smaller cars

General Motors CEO Dan Akerson says Cadillac’s new small car will be positioned to compete with BMW and Mercedes.

Associated Press

General Motors CEO Dan Akerson says Cadillac’s new small car will be positioned to compete with BMW and Mercedes.

LANSING, Mich. — With fuel economy increases looming, U.S. automakers are placing big bets on small cars, adding new models, investing in factories and hiring workers at a rapid pace.

General Motors said recently it will add a new small car to its Cadillac lineup. It plans to spend $190 million to upgrade its Lansing Grand River plant to build the car, and will add 600 jobs to the plant's work force of 1,100.

Chrysler Group also said it will invest $600 million in its Belvidere, Ill., assembly plant to build new cars starting in 2012. Chrysler didn't say which cars will be built there, but at least one of them will likely be a small car to replace the Dodge Caliber, which is currently built in Belvidere. The investment won't create new jobs, but the company will retain the 2,349 jobs at the assembly plant and a nearby parts stamping plant.

Those announcements were only the latest in the small car investment boom. Last month, GM said it will start producing two new small cars — a revamped Chevrolet Aveo and the new Buick Verano — at a now-shuttered plant in Orion Township, Mich. And Ford is in the process of a $950 million transformation of its Michigan Assembly Plant from a truck plant to a car plant that will produce the new Ford Focus small car starting next year.

Ironically, U.S. small car sales have been anemic this year, overshadowed by bigger gains in the truck and sport utility segments. Small car sales were up 7.3 percent through September, compared with a 10.3 percent increase in overall sales, according to Autodata Corp. Large pickup sales were up 18.7 percent.

Aaron Bragman, an analyst with IHS Automotive, said people tend to buy smaller cars when gas prices are seeing wild fluctuations, as they did in 2008. But since gas prices have stabilized this year, people have gravitated toward larger vehicles.

As new fuel economy standards creep closer, however, automakers will have to get people to think smaller. Cars, pickups and SUVs will need to meet a new average of 35.5 mpg by 2016, up from 27.5 mpg today, and the government is developing plans for future vehicle models that could push the standards to between 47 mpg and 62 mpg by 2025.

Bragman said downsizing cars, SUVs and trucks will be a necessity to meet the standards.

"Regardless of what people want to buy, this is what they're going to have to buy," Bragman said. "There's a wholesale shift in mind-set that's going to have to happen."

Luckily, small cars aren't what they used to be. The Mini Cooper, which went on sale in the United States in 2002, proved to U.S. consumers that small cars didn't have to be cheap and stripped of amenities, Bragman said. The new Ford Fiesta subcompact has options such as heated leather seats, a moonroof and a hands-free entertainment system.

GM CEO Dan Akerson said the new Cadillac small car will be a sporty, rear-wheel-drive car that will compete head-on with the Mercedes C-Class and BMW 3 Series.

"We've ceded this segment of the market to our foreign competitors for too long," he said. GM didn't reveal the name of the car or when it will go on sale.

U.S. automakers plan for future with smaller cars 11/30/10 [Last modified: Tuesday, November 30, 2010 3:31am]
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