Canberra - The Australian arm of General Motors said on Monday it would build the first fuel-efficient small car in decades after securing government funding and as GM moves onto taxpayer-backed life-support in the United States.
As sales of large-engine family cars traditionally favoured by Australians slide amid tough financial conditions and global warming fears, GM's Holden said it would build a small four-cylinder car in South Australia state from 2010.
"This redefines our future and acknowledges we can take several paths at once. We are breathing extra life into our new vehicles manufacturing operations," Holden chairman and managing director Mark Reuss said.
Sales of new motor vehicles in Australia slid 5.2% in November, the Australian Bureau of Statistics said earlier on Monday, the fifth straight month of falls. Sales were down a steep 17.8% from November last year.
Holden has not built a small car since the 1980s, but Reuss said consumers now wanted smaller, fuel efficient vehicles as the centre-left government moves to introduce a carbon trading regime to slash local carbon emissions.
In November, Prime Minister Kevin Rudd lifted support for Australia's car industry to A$6 billion ($4 billion) to offset tariff cuts and the global economic slowdown, including a A$1.3 billion "green fund" for environmentally-friendly cars.
Rudd, who attended Holden's announcement, said the government would provide A$150 million to help build the car, which would be part of the global Delta small car platform.
"The new car will provide Australian motorists with an Australian-made car that is around 20% more fuel efficient and produces 20% less in carbon emissions than current larger vehicles," he said.
US President George Bush over the weekend ordered Holden's GM parent and Chrysler LLC be given a $17.4 billion lifeline to stave off bankruptcy and protect jobs provided the stalled carmakers prove by March 31 next year they can remain viable.
Australia's government hopes to bolster its own domestic A$7.7 billion industry which builds around 320 000 vehicles each year and employs about 65 000 people, accounting for 6% of local manufacturing.
Only three car makers, local subsidiaries of Ford Motor Co, Toyota Motor Corp and General Motors Corp, manufacture vehicles in Australia. Mitsubishi Motors Corp closed a plant in South Australia this year.
Ford reversed the planned closure of an engine plant in Victoria state after securing national government support.
Toyota said it would build a medium-size hybrid after Rudd's promise of financial help for development of green cars in one of the world's top per-head polluting countries.