Continental Teves, based in Ebbw Vale, is part of the Continental Tyres Group.
It is to lose 70 jobs this year as it scales down operations but a further 350 positions are likely be cut by the end of 2007 when high volume production will shift to Continental's three-month-old brake plant in Zvolen, Slovakia.
The South Wales factory currently specialises in making brake calipers for high volume brands Ford and Volkswagen.
Continental said it would invest about £2.5m to enable about 120 staff to remain at the site, which opened more than 30 years ago, making products for luxury brands such as Porsche.
With rising material costs in the industry, Continental claimed the volume manufacturing business could not remain viable unless production was switched to a lower cost location.
The company has entered into a 90-day consultation period with unions representing the plant's workers.
Following Vauxhall's announcement that it was to downscale its operations at Ellesmere Port and Peugeot's decision to close its Ryton plant, the move to cut back the Ebbw Vale business has fuelled concerns that manufacturers find it easier and cheaper to slash jobs in the UK than elsewhere in Europe.
Owen Smith, Labour candidate in the 29 June parliamentary elections for Blaenau Gwent is calling for a change in the law to make it more difficult for jobs to be moved elsewhere in the EU.