Ford Australia chief executive Marin (Marin) Burela says the US-based car maker's plans to build the Focus in Australia has been abandoned because of "changing global economic conditions".
The car will now be built in Asia.
Mr Burela said no job losses were expected because of the decision.
Last August Ford said building the smaller Focus model here would create 300 new jobs.
Ford will introduce new two-litre four cylinder EcoBoost engines to the Falcon range in 2011, which Mr Burela has touted as the most significant environmental steps in the Falcon's 50 year history.
The car manufacturer will also introduce a liquid injection LPG system for the Falcon and a clean diesel 2.7 litre turbo-charged V6 engine for the Territory.
The Federal Government will invest $42 million from the Green Car Innovation Fund towards the development for the Falcon and Territory while the Victorian government will provide an undisclosed amount.
Despite ditching plans to build the Focus locally, Australian Manufacturing Workers Union federal secretary of the Vehicle Division, Ian Jones, said Ford's announcement was great news for workers.
"This today is a day for rejoicing because it's the way back for Ford Motor Company," he told reporters in Melbourne
"It's a day that workers at Ford Motor Company have been praying for for some time."
New law lures new micro-distilleries to TennesseeASX back into negative territory
