Car giant Ford has reversed a decision to close its Geelong engine plant, saving 400 jobs and giving hope to Australia's embattled automotive industry.
At a time when the carmaker's parent company is fighting for its survival in the United States, Ford Australia will spend $21 million to upgrade its in-line six cylinder engine to meet tough new emission standards and secure its viability into the next decade.
The turnaround comes 16 months after the carmaker announced the plant would close by 2010 because of a downturn in large car sales and a planned tariff cut on imported cars.
Ford bosses told workers their jobs had been saved minutes before the news was made public on Thursday.
The decision is expected to secure a further 900 jobs in the car parts supply chain.
Father of three Jim Kontogeorgis has worked at Ford for 20 years and said the decision was a relief.
"Obviously the decision's a great decision for my family," Mr Kontogeorgis said.
"It hasn't been a sort of healthy environment to work in, a lot of negative thoughts out there, but today's been a very good announcement."
Ford Australia chief executive Marin Burela said it was a good day for an industry "riddled with bad news" but the challenges for the carmaker remained "extreme".
"Our investment will go into developing the engine to meet Euro 4 emission standards," Mr Burela said.
"Standards that in fact will take the whole process and the whole development of the engine to a whole new level - a level that in fact will deliver the environmental targets and requirements that will make it viable into the next decade."
The investment will make the Ford Falcon and Territory models more fuel efficient.
Euro 4 standards will be compulsory in all Australian manufactured cars in 2010.
The federal government has contributed $13 million towards engineering the new I6 engine and the state government has given an undisclosed sum.
It follows the announcement last week of a $6.2 billion Commonwealth rescue package to help the industry produce greener cars.
Federal Industry Minister Kim Carr said Ford's decision would save 1,300 manufacturing jobs.
"Today's announcement shows just what you can achieve if you're prepared to nail your colours to the mast and say this industry has a future and this is an industry worth fighting for," he said.
Victorian Premier John Brumby said it marked an important turnaround for the automotive industry.
"This is a significant and positive step forward, it's one we think which is so significant to certainty and to confidence, to investment and jobs in Geelong and, as I've said, it has a flow-on effect right across the Victorian and Australian economy," Mr Brumby said.
Australian Manufacturing Workers Union national secretary Dave Oliver said the outcome was a win for partnerships between governments, industry and unions.
"The union movement is buoyed by this announcement today and we hope it's a good sign in what is a very difficult period for this industry," Mr Oliver said.