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AN auto industry bailout plan worth $6b has been welcomed as the possible saviour of thousands of jobs as well as good news for car buyers.

Prime Minister Kevin Rudd announced a $3.4 billion lifeline for the industry today, doubling federal assistance to more than $6 billion over the next decade and a half.

Under the plan, A New Car Plan for a Greener Future, the Government has more than doubled the $500 million Green Car Innovation Fund recommended in the federal inquiry into the industry led by former Victorian premier Steve Bracks.

The reduction of the automotive tariff to 5 per cent, as recommended by Bracks, will go ahead as planned in 2010.

The Australian Manufacturing Workers' Union said the plan provided crucial investment for the industry and would save tens of thousands of jobs.

AMWU national secretary Dave Oliver said the Government's package delivered much-needed investment "to maintain ... the heart of the Australian manufacturing sector''.

"While the Government has not committed to maintain tariffs, this package delivers many of the other measures that unions have been calling for.

"The vehicle and component industry is the driver of research and development and employs over 65,000 people directly in Australia and an additional 250,000 in the supply chain of jobs dependent on the industry,'' Mr Oliver said.

RACV spokesman Michael Case said the announcement was good news for the car buyer as well as those employed in car manufacturing.

"We support a plan that will make the local car industry more economically and environmentally sustainable," he said.

"It looks like a longer-term plan which is what's necessary here to green the industry.

"It's certainly good news for car buyers who will have greener, safer, affordable vehicle choices in the future.

"We're hoping the plan will provide more choice and make fuel-efficient vehicles cheaper by virtue of increased local production."

Federation of Automotive Products Manufacturers president Zoran Angelkovski said the package would help drive major changes needed to keep the industry going, by boosting international competitiveness and a shift to environmentally friendly car production.

"The new policy sends a positive signal to Australian and international firms that Australia values its automotive manufacturing industry and wants to attract new investment, particularly in research and development and in sustainable products and manufacturing processes,'' Mr Angelkovski said in a statement.

Marin Burela, president and chief executive of Ford Australia, which has already announced plans to slash 1400 jobs, described the plan as a "tremendous step forward''.

"We at Ford are extremely encouraged, and certainly endorse the plan that was presented today,'' Mr Burela told reporters in Melbourne.

"We see it as a tremendous step forward in providing a framework for the industry to take a paradigm shift in terms of where it's come from, to where it needs to move to.

"It's very, very fair for the Prime Minister to say that this will truly be a stimulus to look for ways to invest.''

State Shadow Minister for Manufacturing, Exports and Trade, Peter Ryan, welcomed the investment, but said it was a shame the Victorian auto industry had to depend on federal help in a time of need.

"Any support for manufacturing in Victoria is extremely welcome, given the number of manufacturing jobs lost in our state, falling investment levels and business confidence and the deterioration in Victoria's finances," said Mr Ryan.

"John Brumby has failed to support Victorian manufacturers for nine years and it is very disappointing that Victorians now have to rely on the Federal Government to protect jobs."

Speaking at the launch, Mr Rudd said the plan was intended to transform the industry, rather than save it.

"It's not about passive assistance," he insisted. "It's about active support for innovation and change."

Mr Rudd said the package will support jobs at a time of a global financial crisis and into the future.

The nation needed a green-car industry that would create high-paid, high-skilled green jobs for the future, he said.

The plan also includes $116 million to support changes brought about through mergers and consolidation in the components sector. Another $20 million is targeted to help suppliers integrate into global supply chains.

A $10.5 million expansion of the LPG vehicle scheme will double payments to buyers of new private-use vehicles fitted with LPG technology. The plan also sets aside $6.3 million from 2009/2010 for a market access program.

The package also provides for a new Automotive Industry Innovation Council, which will bring together decision-makers to implement innovation and reform in the industry.

Mr Rudd and Industry Minister Kim Carr detailed the package during their visit to Melbourne's Automotive Centre of Excellence.

Senator Carr said the package would improve skill levels and competitiveness in the manufacturing sector.

"We won't get it by standing by and watching from the sidelines, you need a plan, you need a vision for the future, you need a partnership with in and above all, you need investment,'' Senator Carr told the launch in Melbourne.

"The package we are announcing today is all about attracting that investment.

"It's about greening the industry, strengthening the local supply chain, boosting skills and increasing international engagement.

"More importantly and most importantly of all, it's about creating jobs.''

Senator Carr pointed out that 60,000 people were employed by car manufacturing across Australia, with more than 200,000 indirectly dependent on the industry.

The plan follows warnings that, without action, up to 7000 carmaking jobs could be lost by the end of next year.

GM Holden has also recently announced 500 job losses.

In an interview with The Australian, Senator Carr would not be drawn on the cost to taxpayers of the new package, but said car manufacturers would not be offered a blank cheque.

"All program assistance is predicated on post-production milestones being met," Senator Carr said.

Deeply concerned about the impact of the global financial crisis on the future of the domestic industry, the Prime Minister has sought private assurances from carmakers' chief executives that promised new investments in Australia will proceed despite the economic slowdown.

Mr Rudd has rejected Coalition warnings that the Government should hold fire until it is known whether US car giants will merge or even collapse and what the details of president-elect Barack Obama's mooted bailout for US carmakers are.

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