In another body-blow for the American auto industry, General Motors has announced that the new factory intended to build small-capacity powerplants for the upcoming Chevy Cruze and the 2011 Volt hybrid has been put on the backburner indefinitely.

The plant was earmarked to build the Cruze and Volt’s 1.4 litre turbocharged petrol four-cylinder motor, however cash-strapped GM has been forced to delay construction until sufficient capital can be raised.

The decision to halt construction of the new factory won’t impinge on the release of either the Cruze or the Volt, as GM’s European engine plants are expected to have enough capacity to deal with short-term demand. It will, however, have big implications for the people of recession-struck Flint, Michigan, who were counting on the factory to generate hundreds of new jobs.

Will the people of Flint ever get their factory and will GM be able to keep up with demand for the Cruze and Volt after they launch? Time - and GM’s balance sheet - will tell.