General Motors' Holden will go ahead with a critical upgrade to its South Australian factory in Elizabeth to prepare for the next generation Commodore due in 2016 - even though it is yet to win further funding from the federal government, local media reports said.

The News Limited Network said the revelation contradicts federal government insiders who claimed that General Motors executives in Detroit had already decided to shut the Holden factory.

The report said News Corp Australia had been told by factory workers that Holden will make the planned changes to the body shop during the scheduled summer shutdown in December and January, to ready the plant for tooling for the new large sedan which, they said, is front-wheel-drive.

News Limited noted that, if the new large car - which Holden has said it will call a Commodore - goes ahead, it will be the first time in the brand's history that its top selling model is not a rear wheel drive car.

News Corp Australia has been told that Holden is spending A$250,000 to make the upgrades to the body shop because it would be too costly to do at a later date.

The factory preparations should not, however, be viewed as a guarantee that Holden's manufacturing future is safe, industry observers have warned, News Limited said.

The carmaker is still waiting on a decision about future funding from the federal cabinet in late April or early May.

An industry insider told News Corp Australia: "The deal may not be done (to secure Holden's manufacturing future) but this is a prudent move. In the scheme of things, this is not a large sum of money to spend when to delay it would cost much more because it involves shutting the factory for an extended period."

News Limited said a Federal Chamber of Automotive Industries report had claimed the loss of the car manufacturing industry would wipe $21.5bn of economic activity from the Australian economy.

The report also claimed that it would take the economies of Adelaide - home to Holden and Melbourne - home to Toyota until at least 2025 to recover from the associated job losses.

The new report prepared by the Allen Consulting Group, using economic analysis from Monash University, found that the $500m the car industry received each year generated a claimed $21.5bn in economic activity.

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