A joint Federal-State government assistant package has been proposed by South Australian Premier Mike Rann to ensure a planned $A1 billion expansion to build two new cars goes ahead at Mitsubishi Motors Australia's factory in Tonsley Park, writes Mike Duffy.

The ambitious expansion plan would double current production at the Adelaide plant and create 1000 new jobs – boosting the workforce by 25 percent.

Japanese parent company Mitsubishi Motors Corporation is eager to sign off on the new investment – so long as the state and federal governments are prepared to play a role in financing the project.

MMC wants its Down Under affiliate to produce the next-generation Magna in 2005 and a luxury new large car from 2006.

Both cars would be built in both left and right hand drive forms for the Australian and export markets, particularly the United States.

Mitsubishi Motors Australia loses the right to export the Diamante-badged Magna to the US in late 2004 because Mitsubishi Motor Sales of America, which expands its operations into Canada next September, will source a luxury version of the next generation Galant from its plant in Illinois from 2005.

MMC sees the new large car as the logical way of replacing the much-needed Diamante volume at its Australian plant.

COO Rolf Eckrodt, who will become MMC's president and CEO in June, said he was optimistic both Australian governments would be prepared to play a part in funding the expansion.

Eckrodt gave the Australian subsidiary an ultimatum to turn record losses of $A186 million in 2000 into profit last year – or end local manufacture. The company rebounded, booking a profit of $A16 million for 2001.

But now a second condition stands between Mitsubishi Motors Australia and its significant expansion – government assistance.

Premier Rann has already committed his government to giving Mitsubishi a $A20 million special investment loan and has put a joint assistance proposal to Federal Prime Minister John Howard at a Council of Australian Governments meeting, currently under way in Canberra.

Howard has asked Mitsubishi Motors for more details of its proposed expansion programme.

Rann said the assistance would be conditional on Mitsubishi setting up a research and development centre in Adelaide to serve the car maker's global operations.

“Essentially, I am proposing we get away from the traditional way of doing business which has been to hand out cheques,” he said.

“This is about ensuring we add value to what we have at present and if we can achieve a $1 billion investment, 1000 new jobs and a new R&D centre, then it would be substantial.

“We want to secure an almost $1 billion commitment from Mitsubishi to build a new luxury car here in South Australia for the world market," Rann added.

“That will involve doubling the number of cars produced by Mitsubishi Motors Australia and an extra 1000 jobs at Tonsley Park.

“What I want to see is a partnership of the state and federal government in securing its future."