Parts of Australia may fall into recession which will leave thousands of people out of work as Holden and possibly Toyota leave Australia, unions have warned.
About 1600 jobs will be lost at Holden's Elizabeth plant in Adelaide while another 1300 will go from its operation in Melbourne.
But there are fears that more jobs from suppliers will also disappear, especially if Toyota - as expected - follows Holden and Ford out of Australia.
Australian Manufacturing Workers Union divisional secretary Dave Smith said the situation in Adelaide was particularly fragile.
"In Elizabeth . . . the unemployment rate is already 14 per cent, it's 40 per cent youth unemployment there," Mr Smith said.
"It will devastate the community of Elizabeth. It will devastate Adelaide."
South Australia Premier Jay Weatherill said the social and economic cost of Holden's move would be enormous, but vowed the State would fight on. "South Australians have always demonstrated their enormous resilience in the face of adversity," Mr Weatherill said. "We will face this challenge, we will overcome it and we will emerge stronger,"
The Australian Industry Group said it held fears for about 3000 businesses directly linked to the car supply chain.
Chief executive Innes Willox said about 5 per cent of the nation's manufacturing workforce was tied to the automotive sector and another 50,000 workers would be indirectly affected by Holden's decision.
"Given the importance of this industry, it is vital that the Government now acts decisively to ensure a strong and dynamic industrial sector in Australia," Mr Willox said.
But WA-based AHG told the sharemarket the decision was not expected to have "material impact" on its network of vehicle dealerships.
"General Motors remains a leading global manufacturer with a comprehensive selection of models and we are confident they will continue to be an important part of AHG's broad product range," managing director Bronte Howson said.
Right-wing conservative think tank the Centre for Independent Studies said the decision showed that industry assistance had failed workers, consumers and taxpayers.
Research fellow Simon Cowan said Holden's departure would ultimately benefit the nation.
"We must stop handing out taxpayer money to multinationals and focus instead on ways to help vulnerable workers whose livelihoods are being slashed," he said.
'It will devastate the community of Elizabeth. It will devastate Adelaide.' " AMWU secretary *Dave Smith *