Production of engines for Jaguar Land Rover at the Ford Engine plant in Bridgend will stop three months earlier than had been expected.
Ford has confirmed that its contract to supply JLR with petrol engines will cease in September 2020.
Union leaders said it was “the news we most feared” and put 1,100 jobs at risk.
The company said that it was disappointing news but that it was looking at new business opportunities.
Half of the workforce of 1,930 at Bridgend work on that engine.
At the moment Ford Bridgend makes half a million engines a year for Ford’s own models and a quarter of a million for JLR.
After 2020 the number of engines being made on the site will be just a quarter of present production levels.
Ford said it was not giving any detail as yet of how the workforce will be run down as it is in consultation with unions.
A spokesman said it would “continue to look at other high technology opportunities for Bridgend in the future.”
Last month, the workforce voted for industrial action over concerns about the plant’s future.
JLR said: “Ford has been, and remains, an important strategic supplier to Jaguar Land Rover under an agreement which was negotiated to support our business until the end of the decade.”
The GMB union said it was the news it most feared and it called for an urgent meeting with the economy secretary.
Jeff Beck, regional organiser, added: “Unless alternate contracts are found, this will have a devastating and far reaching impact on the communities in and around Bridgend as well as across south Wales as a whole.”
Economy Secretary Ken Skates called the decision “very disappointing” and said the Welsh Government remained absolutely committed to doing all it could to protect the plant.
He added: “We are calling on JLR to confirm that this move will not sacrifice jobs in Wales and displace them to the West Midlands.”
Plaid Cymru AM Bethan Jenkins said: “We must find more work for the plant and find ways for it to diversify”.
The Bridgend plant has won investment of £100m to make the next generation of engines, called the Dragon, for Ford cars.
Originally it was a cash injection of £181m but that was reduced to £125m in September 2016.
In line with that, the planned number of Dragon engines was cut from 250,000 a year to 125,000.