Some industry experts are warning a long war in Iraq would send both the US and Australian car markets into recession, but the Australian industry, although currently enjoying near record sales, is particularly vulnerable.

Cars sold worldwide last year were Australia's second largest manufactured export, worth just over 3.0 billion dollars (1.8 billion USD), of which 57 percent went to the Gulf.

Three of Australia's four automakers, Toyota, Holden and Mitsubishi, hope to ship some 90,000 vehicles, worth more than 1.75 million Australian dollars to the Middle East this year.

The international automotive consultancy firm Autopolis warned last week that the Middle East export programs of both Holden and Toyota were particularly at risk.

They face the twin threat of disruption to vital Gulf shipping lanes and higher oil prices that would have an impact on sales of the fuel-hungry six-cylinder sedans that have long been the Australian industry's staple product.

With Australia's troops engaged in Iraq as the third coalition force behind US and British troops, the war is shaping as a threat not just to its military, but to its economy.

"At this stage we are watching the situation very closely, but the orders we have remain in place for the moment," said Jason Laird, spokesman for Holden, the Australian division of US giant General Motors.

Laird told AFP Holden is especially concerned about any threat to shipping routes, but said: "We are in constant dialogue with the shipping companies and we have contingencies in place if the situation changes."

Holden has much at stake. It is looking to repeat last year's exports of 31,700 cars -- around 24,000 of those to the eight Gulf countries, Bahrain, Oman, Lebanon, Qatar, United Arab Emirates, Kuwait, Syria and Saudia Arabia.

Its sturdy big Commodores, Statesman and Caprice models are considered ideal for the Gulf because they are built to withstand the rigours of an Australian climate and road network similar to that of some Gulf countries.

The vast majority go to Saudi Arabia, rebadged as Chevrolets. The more basic models make up much of the Saudi police car fleet while more luxurious versions are popular with increasingly affluent Saudis.

Toyota spokesman Peter Griffin said Middle East orders and deliveries were on schedule and the company still hopes to export some 66,000 Camry sedans this year.

"At the moment it's business as usual, demand for the cars is very strong," he told AFP. "But obviously the whole issue is something we are watching very carefully on an hour by hour basis.

"The key thing is shipping, so we have been working with our shipping companies to develop a contingency plan if it becomes necessary."

Mitsubishi Australia, whose major export focus is the United States, will feel less of an impact from any disruption to Middle East exports, but has plans to ship 4,000 cars there this year.

Autopolis Australian representative Kim Rennick said the fact that Holdens are rebadged as Chevrolets exposes them to another threat.

"If the US becomes seen by those markets in a negative light, there could well be a backlash against such an overtly American name," Rennick told The Australian newspaper this week.

Rennick said Toyota faces a lower risk because the Australian origin of Camrys sold in the Middle East is probably not well known.

With no exports to the Middle East, Ford Australia will not be affected, but its president Geoff Polites said the loss of a significant number of international sales could affect some local parts suppliers.

WAR.WIRE