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Handouts ... much of the $6.2bn Government money for carmakers could end up in the US.

• $6.2bn will be pumped into car industry
• Insiders say money will end up in US
• Motor show pictures: Sydney | Paris

THE American owners of local Ford and Holden plants will be laughing at the Australian "suckers" who have handed them a $6.2 billion industry assistance package, former car company executives say.

Expressing disappointment yesterday at the latest industry handout, industry veterans said the money would ultimately end up back in Detroit rather than bolstering needy sectors of the local industry.

Former managing director of Mitsubishi Australia Graham Spurling said the car companies would get a "free ride" from the Rudd Government on research and development, The Australian reports.

"They will say: `Aren`t we suckers`," said Mr Spurling, who led a South Australian government special automotive industry taskforce.

"We should be pumping so much - everything we can - into making the remaining car components people more efficient, more financially viable, less reliant on the vagaries of the car companies and their choices."

The Rudd Government is pushing for the big car companies to invest in locally made "green cars" by more than doubling its green car fund to $1.3 billion.

Component manufacturers will be encouraged to consolidate and increase efficiency with $116.3 million, and the 10 per centimport tariff will be halved from 2010.

But the financial troubles of GM and Ford in the US continue to cast doubt on the survival of subsidiary Australian manufacturing.

General Motors, Holden`s parent company, has appealed to the US Government to save it from collapse, saying its finances are so bad that it needs a federal aid package before president-elect Barack Obama takes office in January.

Deutsche Bank this week downgraded General Motors` share rating from hold to sell, saying the automaker would be bankrupt before the end of the year unless the Government agreed to a bailout.

Car analysts doubt whether the green car fund will result in new investment.

"There`s a fair bit of money that`s got to be put up (by the car companies) before the Government puts any money up," said car industry commentator John Mellor. "And at the moment, Ford and General Motors are not in the position to be putting too much money up."

Australia`s car industry has already taken big hits this year, prompting reassessment of its future.

Mitsubishi closed in Adelaide in March, and Ford announced 450 job cuts at its Broadmeadows and Geelong plants in Victoria last month. Holden is to close its engine plant at Fishermans Bend in Victoria.

Industry sources have also warned Canberra that car dealers face the loss of $2 billion in credit with the withdrawal of GE Money and GMAS Financial Services from Australia. This might mean showrooms could not be stocked.

Former Mitsubishi executive Bob Manning said the Government`s package failed to address fundamental failures in the domestic car industry.

"It largely gives money to companies whose parents are dreadfully insolvent anyhow or close to it," he said.

Mr Spurling said while the Government`s intention to promote green cars was good, achieving that result would be tough. "I don`t see enough people within Australia in the parts industry that can carry the ball in this technological strategy," he said.

Toyota`s plan to build 10,000 Camry hybrid cars in Victoria from 2010 was trumpeted by Kevin Rudd earlier this year. Holden won`t say if it is reconsidering producing a hybrid Commodore. Six months ago it rejected it as too expensive to develop.

Melbourne Business School professor Paul Kerin said the assistance package would benefit vested interests. "This plan is spending two and half times what Bracks proposed so it`s no surprise that it`s a shocking value for taxpayers and consumers." He said carmakers "were masters at playing off naive governments around the world".

"There are two interpretations of why the Government is giving so much money. One is they are naive. The second is they`re pandering to vested interests, both producers and unions because it`s a highly unionised sector."

Read more on this story in The Australian.

With additional reporting by John Wiseman, Ewin Hannan