Production is to be suspended at Caterpillar in Peterlee for up to 12 weeks as it deals with a fall in demand and tries to avoid job cuts, say union officials.
Workers were balloted on the proposal, with 95 per cent voting in favour of the freeze.
The layoffs start next Monday when the factory will halt work on its line of articulated lorries for five weeks, with the staff to receive 75 per cent of their usual wages.
Union officials say a further break of six weeks with full pay and another week are also expected leading up to the end of May.
The decision was made after months of negotiations between unions and the company, which employs 700 people at its factory in Mill Hill, in the North West Industrial Estate.
Mike Routledge, regional officer for Unite the Union, said: "I think the company and the employees should be congratulated over reaching an agreement which has allowed them to negotiate as far as necessary to avoid compulsory redundancy at this present time."
A spokesman for Caterpillar said an overwhelming majority of employees at the Peterlee plant voted in favour of six non-production weeks over the next three months, in response to economic conditions.
He said: "We commend our employees in joining us as we work hard to minimise the need for compulsory redundancies."
Caterpillar has announced it will have to lose 5,000 workers world-wide by the end of March, in a report of its earnings during 2008.
So far 15,000 positions have been lost across its operations, which are also based in Asia, North America and the Middle East.