Ottawa, Ontario – The auto industry is expected to return to profitability in Canada this year, thanks to restructuring in the industry, according to the Conference Board of Canada. After three consecutive years of steep losses, the industry is forecast to post a profit of $300 million this year.
Profits are further expected to approach $1 billion next year and surpass $2 billion annually by 2015, according to the report, Canadian Industrial Outlook: Canada’s Motor Vehicle Manufacturing Industry Autumn 2010.
“Even though U.S. sales remain weak, the industry will return to the black in 2010,” said Michael Burt, associate director of industrial economic trends. “Profits are expected to rise even more sharply starting next year as U.S. demand picks up. But profit margins will remain weak by historical standards because the strong loonie negatively affects export prices and 84 per cent of Canadian-made vehicles go to the United States.”
The massive restructuring of General Motors and Chrysler has resulted in sharply reduced costs, and labour productivity has rebounded to 2007 levels. As a result, costs are up by 30 per cent this year, compared to a 37 per cent gain in revenues.
Production will grow by 38.5 per cent in 2010 and is expected to rise by another 15 per cent in 2011, but output will still remain below where it stood prior to the recession due to continued weakness in U.S. vehicle sales. Canadian production is not expected to return to its pre-recession levels until 2014.