SAN FRANCISCO—General Motors Corp. said Thursday it will make a $500 million investment in its Lordstown, Ohio, plant to build the Chevy Cruze, its next stab at competing in the red-hot small-car segment.

The Cruze is slated to be built beginning in 2010 at the Lordstown facility, which was opened in 1966 and currently rolls compact cars like the Cobalt—the car the Cruze will be replacing.

GM said that the sedan, expected to deliver 40-plus miles to the gallon, will be officially unveiled at the Paris Motor Show next month.

The automaker is reacting to inten...