Soldiers from the Special Operations Task Group move through Tarin Kowt after a

Partnership was born on the battlefields of Iraq and Afghanistan.

A glimmer of hope is shining in Australia's ambition to become a world leader in ''smart manufacturing'', with a Melbourne company winning approval from US military leaders to produce defence force technology.

As Holden, Ford and Toyota withdraw from making cars in Australia, Aquaterro has joined Wilcox Industries, a US company that makes high-end tactical equipment for soldiers and police officers, to build a factory that will create 100 jobs.

It will cost about $10 million and be Wilcox's first overseas plant.

Aquaterro chief executive Graeme Bulte said it was a partnership born on the battlefields of Iraq and Afghanistan where Australian troops noticed a wide technological gap between their equipment and that of their American allies.

Business boomed for Aquaterro, which distributes Wilcox's products in Australia. Mr Bulte said what had been a niche market, probably supplying about ''a half a dozen guys, suddenly became thousands''.

''We had the Australian Defence Force come to us and to Wilcox and say: 'We are side by side in the mountains with our American counterparts and we need to be able to keep pace with that and be interoperable with them at that same level - can you help','' Mr Bulte said.

''The details of what we provided I can't give you, but we turned around a problem that they'd had been dealing with for about a decade and fixed in inside of 60 days.''

Two years later, Wilcox has gained approval from the US Department of State to build an Australian factory and share closely guarded US military technology secrets. Although the details are classified, Mr Bulte said the products range from protective clothing and night vision mounts to ''devices as big as an iPhone, which cost about $20,000''.

Aquaterro and Wilcox are scouting sites in Victoria, South Australia and Queensland.