Chrysler Group is to increase production of the just-updated Dodge Caliber hatchback by 10,000 units this year in response to increased demand for smaller, fuel-efficient models.

The company's Belvidere plant in Illinois will return to a second-shift operation from 5 October, adding 850 workers, Chrysler said. This is in addition it its announcement earlier this week that it would raise production by more than 50,000 units this year at seven North American plants as US sales surge following the introduction of the popular 'cash-for-clunkers' incentives.

Chrysler's sales fell 15% in August, partly due to inventory shortages related to extensive plant shutdowns during its bankruptcy restructuring this summer.

Dodge brand head Michael Accavitti said while production was now being increased to meet demand: "We are cautious about the continued volatility in the industry and will monitor demand in order to respond to market conditions."

Dodge updated the Caliber, which replaced the Neon sedan in 2006, for 2010 with a new dashboard, improved interior materials, a two-litre petrol engine in place of the 1.8 plus a new 2.2-litre Mercedes diesel for export markets in place of the previous two-litre Volkswagen unit.