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Cruze Demand Drives GM to Up Production

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Reportedly, General Motors Company (GM - Free Report) has decided against keeping the Chevrolet Cruze factory in Lordstown, Ohio, closed during the week of Aug 26. The automaker will add a week of production in the plant owing to the incremental demand for this compact car in the U.S.

Initially, General Motors had declared a weeklong shutdown of the plant during the said week. However, the workers will now be working normally to catch up with the higher demand for Cruze.

Chevrolet Cruze was launched in 2009, the same year when General Motors came out of bankruptcy protection. The present model of Cruze is being assembled at Lordstown plant since Sep 2010. The Lordstown plant provides employment to 4,500 hourly and salaried workers.

General Motors’ total sales in July escalated 16.3% to 234,071 units, Chevrolet sales rose 17.1% to 162,670 units. Year-over-year increase in Chevrolet sales was driven by higher sales volume of Spark, Cruze and Impala. The sales volume of Cruze jumped 70% in July. Further, during the first seven months of 2013, U.S sales of Cruze increased 24%.

General Motors and several other automakers including Ford Motor Company (F - Free Report) and Chrysler Group LLC were forced to suspend production at several plants during the global financial crisis. With the recovery of the overall situation, the automakers are enhancing their production capacity to meet up the growing demand.

In May 2013, Ford announced that it will be enhancing its capacity in North America by an additional 200,000 units this year. Ford also reduced the summer shutdown to one week in 20 plants, including six assembly plants, in order to increase production by 40,000 units. Ford had augmented its capacity by 400,000 units last year as well.

However, recalls of the Chevrolet Cruze are a matter of concern for General Motors. Recently, General Motors recalled its 2011 and 2013 Chevrolet Cruze cars in the U.S. to fix a problem in the power-assisted brakes. This is the eighth recall for Cruze since its launch. Around 230,000 cars are estimated to be recalled by the company.

While safety advocates are worried about the high number of recalls, Cruze continues  to be popular. It was the third ranked compact car in terms of sales in July. Honda Motor Co., Ltd.’s (HMC - Free Report) Civic and Toyota Motor Corporation’s (TM - Free Report) Corolla occupied the first two spots.

General Motors carries a Zacks Rank #2 (Buy).

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