Ford Australia will cut 440 manufacturing jobs as it downgrades production.
The jobs will mostly come from the manufacturing parts of the business, the company said in a statement.
Voluntary redundancies will be offered initially but workers may then be sacked if the required 440 reduction is not reached.
Ford will cut overall production during the next three-and-a-half months to more closely align it with market demand.
Production will drop from 209 to 148 vehicles per day in November 2012 to respond to an industry-wide slump in the sale of large vehicles.
Ford Australia president and chief executive Bob Graziano says the cuts are needed to provide more stability and certainty for the business.
"We understand that, unfortunately, the impact on our employees will be significant, but implementing this structural change is essential to ensure the longer-term health of the business, which is important for our employees, our suppliers and the communities in which we operate," he said in a statement.
"All employees who take up the redundancy will receive a competitive redundancy package, including training and career counselling; and we will work closely with them and our union partners to help our employees make the transition successfully."
Ford cut 240 jobs at its Australian operations last year.
Earlier this year, Ford received more than $100 million from the federal and Victorian governments to ensure the company keeps its Melbourne operations going until at least 2016.
Last month, Ford said it would close the Broadmeadows and Geelong plants for a seven day period in July after 1800 workers were stood down for three days when a key supplier went into administration.
The company is facing a 24 per cent slump in year-on-year Falcon sales and a massive $290 million annual loss, which was announced in May this year.