Ford Australia CEO Marin Burela.
Ford's 40-year-old six-cylinder engine has been taken off the scrap heap.
The company announced yesterday that it will re-engineer the engine to continue beyond 2010 in its Falcon and Territory models, saving hundreds of jobs.
"It is good news not only for our employees at Geelong, but our suppliers and the surrounding community," Ford Australia chief, Marin Burela, said.
The decision saves 1700 jobs, 400 directly at the plant and 900 through the supply chain.
Just 18 months ago Ford announced that the Geelong engine plant would close, with a loss of 600 jobs to make way for an imported V6 engine from the United States.
At the time unions warned as many as 3000 more jobs in and around Geelong would be under threat.
By sticking with the in-line six, Ford will save millions of dollars in testing and developing a new V6 engine for the Falcon and Territory, as well as the cost of re-engineering the vehicles.
Ford executives say new developments in emission technology just in the last 12 months will allow the Geelong built I6 engine to be re-engineered to comply with tough Euro IV emission standards coming into force from 2010.
However, he would not be drawn on what the decision means for the Falcon's ongoing future as a rear-drive sedan.
The current model FG Falcon was launched early this year and is expected to stay in production until 2015.
Burela was not prepared to speculate on the Falcon's future beyond that.
"We haven't made a decision about front-wheel or rear-wheel drive," he said.
"And that discussion is ongoing.
"So no firm decision has been made one way or the other."
Burela said Ford would remain committed to the Falcon "until the Australian buyer says to us that plan is no longer viable".
The company will invest $21 million to ensure the Geelong-built six cylinder engine meets stringent Euro IV emissions targets.
Additional funding will come from the Federal and Victorian governments.
The Federal Government will inject $13 million through the Automotive Competitiveness and Investment Scheme and a lesser amount from the Victorian State government, although the Premier, John Brumby, would not say what the State was handing over.
Automotive manufacturing made a huge contribution to the state and Australian economy, he said.
"It's positive for our suppliers, it means hundreds of jobs are saved here in Geelong but also car component company jobs," Brumby said.
"Victoria is the engine room of Australia's automotive industry," he said.
"It accounts for 57 per cent of the country's automotive production, 66 per cent of component manufacturing and 74 per cent of the nation's research and development, we want to keep it that way."
Burela said the Euro IV I6 engine was part of a "broad product strategy" to improve fuel economy across its range.
This is expected to include putting the next-generation LPG technology into the car.
"We will be detailing and making some further announcements in the next few months," Burela said.
Burela said he believed volatile fuel prices meant there was a strong future for LPG in the Falcon.
The AMWU vehicle division national secretary Ian Jones said Ford's move to rescind that decision would mean "a very good Christmas for a large number of people".
"It is an expression of absolute confidence in the future of Ford Australia," he said.
"It is more than preserving the in-line six engine at Ford Geelong.
"It says to the world that Ford is here not to shrink back as an assembler but it is here for the long haul in automotive manufacturing in all of its facets."
