A bid by a Belgian tycoon to take over Holden's car assembly plant in Adelaide has collapsed.
General Motors and Guido Dumarey's Punch Corporation have decided the business case doesn't stack up.
The decision is a major blow for Holden's remaining workforce and car component suppliers, coming on the same day the company announced Cruze car production would end in October with the loss of 400 jobs.
In a joint statement GM and Punch said the challenges to domestic car manufacturing in Australia - lack of scale, high production costs, supply base contraction and increasing market fragmentation - could not be overcome.
"In particular, the wind-down of the supply base following the manufacturing exit of the three existing car makers, and the critical production mass they represent, is insurmountable," the statement said.
The decision is also a blow to the South Australian and commonwealth governments, particularly to SA Premier Jay Weatherill's trip to GM in Detroit next month to help secure the car giant's support for the proposal.
Mr Weatherill said he would still go to Detroit to discuss GM's plans to support its workers in Adelaide and put other proposals to them about the future of the Elizabeth plant.
"The state government will continue to stand by the workers in the car industry," he said.
Federal Industry Minister Christopher Pyne said he was surprised and disappointed by the failure of the proposal and said it did not match statements Punch and GM had made to him.
"At the end of the day it is a decision for the two parties involved," he said.
As it also announced an end to Cruze production, Holden said it remained committed to continuing Commodore production until the end of 2017.
The company said the deadline for the Cruze came as no surprise to its workforce and had been discussed in weekly staff meetings and forums.
"Holden is giving our employees and suppliers as much advance notice as possible," human resources director Ashley Winnett said.
"We have openly been discussing this move with our people since 2014."
The October job cuts will reduce Holden's workforce at Elizabeth to about 800.
Managing director and chairman Mark Bernhard said Holden would continue to offer all its workers as much support as possible.
"Our focus is to manage the gradual wind down of manufacturing between now and the end of 2017 in a way that treats our employees with respect and dignity as they leave the company and gives them the best chance at gaining future employment," he said.
SA Automotive Transformation Minister Kyam Maher said while it was always known Cruze production would end this year, putting a date on it would still come as a shock to workers.
