There’s a sense of disquiet in the Australian auto industry as Ford Motor Co. President and CEO Alan Mulally flies in to tell Prime Minister Kevin Rudd he will need to freeze car import tariffs at 10%, not cut them to 5% in 2010 as planned, if the domestic auto industry is to survive.

Mulally’s meeting with Rudd today follows Ford Motor Co. of Australia Ltd.’s announcement it is slashing production up to 25% and laying off up to 300 to 350 workers in the face of slowing sales of locally built models under pressure from a slowing economy, high fuel prices and a flood of imports.

In mid-November, Falcon and Territory production will be cut to 40 vehicles an hour from 52, dropping the daily build rate to 285 from 365.

The industry was shaken further when Ford Australia President William (Bill) Osborne announced his resignation after just six months in his current position. He will take over as CEO of an unnamed non-automotive company in the U.S.

Osborne joins his predecessor, Tom Gorman, as Ford Australia’s second boss in six months to exit not only the company but also the industry.

Osborne still will be in Canberra with Mulally for the talks with Rudd and Industry Minister Kim Carr.

The government is considering its response to a review of future aid for the auto industry led by former Victoria Premier Steve Bracks. The review calls for the tariff rate to be halved as scheduled.

With Ford Australia’s decision to cut production and jobs, car makers and labor unions are stepping up a campaign calling for the tariff to be frozen and for the government to kick in more financial support.

They say Ford Australia’s plan to reduce production by 18,000 units – the company built some 73,000 vehicles last year – will be a disaster for the car parts sector. Some estimate the ripple effect will cause thousands of job losses.

The general rule of thumb is for six or seven additional jobs to be lost for every position eliminated at a vehicle assembly plant, Australian Manufacturing Workers Union National Secretary Dave Oliver says.

The Ford cutbacks are going to have a significant impact, he says, and the government needs to act with caution and reject the proposal to further slash tariffs, because the industry needs continued support as it adapts to a changing global market.

“The proposal to further slash tariffs would put Australia out on a limb ahead of the rest of the world. Australian’s are sick of having their jobs martyred for the theory of free trade,” Oliver says in a statement.

“At a time when the rest of the world is maintaining and freezing their tariffs, a reduction in Australian tariff protections will have serious trade implications.”

Federation of Automotive Products Manufacturers CEO Anna Greco tells the Melbourne Age the Ford Australia move will put even more pressure on the parts sector where she says many companies are teetering on the brink.

“When your industry is already under incredible pressure, every additional pressure ends up making more and more businesses marginal,” she says.

Industry Minister Carr tells Sky News TV he expects further job losses throughout the Australian industry.

“We know that the industry is facing these acute challenges, and I can’t say with any certainty that there won’t be further announcements in regard to job losses,” he says.