Labor is planning to withdraw some $20 million of a grant promised to Ford Australia by the former Howard government which could now jeopardise plans to build an new four-cylinder engine line (for the coming Focus range) at its Broadmeadows plant.

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The grant of some $52.5 million for special assistance was announced in May 2006, and which Ford has already received about $32.5 million. But the remaining $20 million was not due to be paid until late 2009.

The money was intended to help start production on the new Falcon project (known as 'E8' - the V6 powered 2010 model) but Ford sought to alter the agreement so the money could be spent on developing the four-cylinder Focus.

Production of the Focus, Ford's first locally-made small car in a decade, is due to start at Broadmeadows in 2011, creating 300 jobs, but the new contract between Ford and the Government was not formally amended before the November federal election, creating a loop-hole for the Rudd Government to now withdraw the funding.

Ford now has legal grounds to sue (breach of faith) which has been backed by the Australian Government Solicitor.