The West Midlands has to generate more high-skilled, valueadded jobs to survive as a manufacturing centre, a senior industrial figure said.
Mike Beasley, regional chairman of the CBI, was speaking after the business organisation's latest industrial trends survey painted a gloomy picture of the state of manufacturing nationally.
Thousands of fresh job losses are expected following a sharp fall in orders in recent months, the report predicted.
The CBI said 22,000 jobs were set to be axed in the three months to June after 21,000 were cut in the first quarter of the year.
Manufacturing employment remained on a long-term downward trend and will be cut across most industrial sectors, it warned.
The CBI based its predictions on a survey of 676 companies between March 23 and April 13, well before the huge impact of the collapse of MG Rover began to take effect.
"We know that things are tough for manufacturing in the West Midlands, you only need look at MG Rover to see that," said Mr Beasley, a former managing director of Jaguar.
"The successful companies will be those with high skills and high added-value products.'
The creation of high-tech " corridors" was helping the region to overcome its dependence on traditional volume manufacturing.
"I think the prospects are strong but we have to understand that changes have to be put in place," Mr Beasley added.
Manufacturing firms reported the weakest three-monthly performance since 2003.
Orders for consumer goods declined "significantly" while costs and prices increased at the fastest rate since the summer of 1995.
Falling orders and rising costs led to the third successive deterioration in confidence.
Manufacturers blamed sharp rises in oil prices and the higher costs of other raw materials for their pessimism.
Two out of five firms said costs had risen over the past three months and more than a third saw new orders fall.
Export orders declined at the fastest rate for 18 months and companies reported the first decline in output for six quarters.
Manufacturers said they planned to cut investment in buildings as well as machinery reflecting deteriorating confidence and uncertainty about future demand.