Ford announced Thursday it would cease making vehicles at its unprofitable Australian plants in 2016 and axe 1,200 jobs, having produced its first car in the country in 1925.

Ford Australia chief executive Bob Graziano made the announcement as he revealed losses of Aus$141 million (US$136 million) after tax in the last financial year and Aus$600 million over the last five years.

"Unfortunately we will cease our manufacturing operations in October 2016. As a result, approximately 1,200 jobs will become redundant when those sites close," he said.

Graziano said the decision was the result of local manufacturing being "driven by increasingly challenging market conditions -- including market fragmentation and the high cost of manufacturing".

Australia has annual sales of approximately 1.1 million new vehicles, and customers have access to more than 65 brands and 365 models.

Graziano said this made Australia one of the most competitive and crowded automotive markets in the world.

"Given the fragmented marketplace and the low model volumes that result, we decided that manufacturing locally is no longer viable," he said, adding that all viable alternatives had been considered.

"Our costs are double that of Europe and nearly four times Ford in Asia," he said.

"The business case simply did not stack up, leading us to the conclusion (that) manufacturing is not viable for Ford in Australia in the long-term."

The jobs will go at Ford's Broadmeadows and Geelong factories in Victoria state, which will close. While manufacturing will stop, Ford will remain in Australia as an importer and dealer, employing some 1,500 people.

Australian Manufacturing Workers Union national president Paul Bastian said the news was a "disaster" for workers and a "tragedy" for the local and national economies.

"We want the government to call a meeting of all the auto players," he told Fairfax radio.

"We want to take the positives out of this. We want bipartisan support to see what we can do to ensure that we have an auto industry, that we have an industry that is sustainable."

Australia's auto industry is struggling with the effects of the high local dollar, which has traded near or above parity with the greenback for almost two years, squeezing exports and compounding rising production costs.

Though Australia did not go into recession during the global financial crisis, domestic confidence has failed to return to pre-crisis levels, also hitting car sales.

Canberra extended a Aus$3.2 billion bailout to the ailing sector at the height of the global downturn and stepped in with additional lifelines to Ford and General Motors subsidiary Holden last year.

Ford first began making vehicles in Australia in 1925, when Model T cars rolled off the production line in Geelong.