A rail workers' union says a decision by KiwiRail not to have its own workshop build new trains for Auckland - meaning the job will go overseas - is a slap in the face for the local industry.
Despite much lobbying by the local industry, KiwiRail has announced its workshop will not build the electric trains.
Chief executive Jim Quinn says the company is too small and lacks the expertise to have the trains ready in time for 2013.
Rail and Maritime Transport Union secretary Wayne Butson says workers at KiwiRail's Hillside plant in Dunedin are more than qualified to build the trains - a job which an economic consultancy estimates would have added $250 million to the economy.
Mr Butson told Morning Report key components could be bought overseas and assembled locally.
"Every single piece of work that you do in New Zealand cuts down the amount of money going out and our terrible balance of payments deficit".
Mr Butson says New Zealand is losing skilled people because they see no future in this country.
Govt keen for some work to be done in NZ
The Government says it wants to see some of the manufacturing work carried out in New Zealand.
Prime Minister John Key says he would expect overseas tenders to include having some construction work done here and they should try to achieve a balance in their bid for the KiwiRail contract.
However, Labour Party says a directive to KiwiRail to look for an overseas supplier proves the Government has a "can't-do" attitude.