Unidrive said its decision was forced by a number of factors, including higher steel prices, a drop in exports to the US and a drop in demand from local customers, including Mitsubishi, which closed its Adelaide assembly plant earlier this year.
Unidrive human resources manager Colin Thomson said staff were notified of the job cuts before the announcement last week of 350 redundancies at car giant Ford in Melbourne and Geelong.
"While the situation at Ford will further add to our reduction in activity, it was not the catalyst," Thomson said.
The Melbourne-based company supplies axle components to major Australian vehicle manufacturers and exports to General Motors in the United States.
Australian Manufacturing Workers Union (AMWU) Victorian secretary Steve Dargavel said the Unidrive redundancies arose after the downturn at car companies including Ford, Corvette and Mitsubishi.
"This site used to employ over 500 workers, from September it will employ 120 workers," he told reporters in Melbourne on Wednesday.
"That is bad for Australian industry, it's bad for members and it's bad for jobs."
Thomson, however, said Unidrive employed 248 staff and more than 200 would still be employed when the cuts are enforced next month.
Dargavel said the union believed more job cuts in the sector were inevitable.
"We believe there will be a significant number of component suppliers in Victoria that will be announcing reductions as a consequence of the reduced manufacturing schedule of the companies like Ford."
Unidrive employee, 38-year-old Stephen Andrado, said the job cuts news was depressing and a cloud had descended over the factory.
"There's a really bad air of uncertainty here at the place," the father-of-two children, aged three and five, said.
Andrado said he didn't blame the company.
"I don't think the government is doing a hell of a lot to help us.
"Don't lower the tariffs anymore, please," he pleaded.
Dargavel called on the government to maintain tariff levels and support the industry to move towards producing more fuel-efficient, smaller cars.
He said any policies arising from the review of the automotive industry by former Victorian premier Steve Bracks needed to carefully consider the plight of the components sector.
The review recommended slashing tariffs from 10 per cent to five per cent in 2010.
"We need to discard this ridiculous idea that we are going to halve the tariff."
