Mitsubishi Motors Australia has accepted an $A85 million ($US46.1 million) federal and state government funding package and has given the go-ahead to a $A1 billion expansion programme, writes Mike Duffy.

The deal will involve the development of two new cars which will guarantee the car maker#;s presence in Australia until well into the next decade.

The re-investment will lead to a doubling of annual production to around 80,000 vehicles by 2006 and create 1000 new jobs for assembly workers – plus hundreds more positions in the components sector.

As well, the company has agreed to set up a research and development facility to service Mitsubishi#;s worldwide operations, a move which will create 300 jobs for specialist technicians.

The announcement of government funding and the massive investment by parent company Mitsubishi Motors Corporation of Japan ends months of uncertainty that threatened MMAL#;s future as an assembler.

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Against a backdrop of several high-profile corporate failures – including the bankruptcy of Ansett Airlines – prime minister John Howard denied the $A85 package was a bailout.

“This is not a company that is failing,#;#; he said.

“The motor vehicle manufacturing industry is a world industry. We have to decide whether we want some of the action in Australia or whether we are to allow it to be scattered to the four winds and go elsewhere.

“I want a certain amount of the action in Australia.”

MMC executive vice president and chief operating officer Rolf Eckrodt said in a letter to the premier of South Australia, Mike Rann, that the $A85 million support would provide the automotive industry with “the impetus for developing state-of-the-art technical and innovative advances which are ultimately required for the industry to remain competitive in the long term”.

Government funding consists of $A35 in cash assistance from the federal government in 2004/2005 and $A40 from the South Australian over five years plus in-kind support of $A10 over the next 10 years.

Mitsubishi Motors Australia now will press ahead with the development of a Magna/Diamante replacement for launch in 2005.

This will be followed in 2006 by the release of a large, luxury vehicle for the Australian domestic and overseas markets.

A 20,000 annual sales target has been set for the yet-to-be-named large car in the United States.

MMAL last year staged a stunning $A200 million turnaround booking a profit of $A16 million, following record losses of $A186 million, to meet the first condition set down by its parent company for its survival.

Ironically, today#;s announcement which seals Mitsubishi#;s future for at least a decade came as talks failed in a dispute which already has brought to a standstill assembly lines at GM affiliate Holden in Adelaide and Ford Australia in Melbourne.

About 450 striking workers with exhaust systems supplier Walker Australia – owned by Tenneco Automotive – will continue into next week and is expected to halt production at Toyota and Mitsubishi on Tuesday.

Holden and Ford has used programmed days off to handle the stoppage since mid-week, but both car makers are expected to stand down workers without pay if the strike continues into next week.

Holden, which is struggling to keep pace with demand for its Commodore, Statesman and Monaro Coupe on the domestic market and orders for Chevrolet-badged Statesman Caprice to the Middle East, has served notice on car unions it will consider a plan to source components overseas to eliminate continual stoppages.

The Walker strike is the third dispute this year which has cut supplies to the car industry and either stopped or restricted production.