Canada’s auto manufacturers should expect to see their highest profits in years in 2015, according to a Conference Board of Canada Spring 2015 Industrial Outlook report.
The profits will be due to record North American sales and the lower Canadian dollar. Industry profits are forecast to reach $2.3-billion in 2015, up dramatically from $1.3-billion in 2014.
“Profit margins should improve over the next two years, and vehicle producers will likely see their highest profits in years,” the report predicts.
Sales are expected to rise 5.6 per cent to $59.5 billion this year.
About 86 per cent of vehicles produced in Canada are to the U.S., where Canada’s lower dollar is proving to be a competitive advantage. The Canadian dollar, which closed on June 23 at 81.08 cents U.S., is trading at lows not seen in a decade – down from about 92 cents U.S. in June 2014 as falling world prices for oil hurt Alberta’s prospects and Canada’s overall economic growth.
The report also notes that auto sales in Canada may be reaching a saturation point, as lower oil dampens demand in Alberta, but still have a way to go in the U.S., where the labour market remains strong, the report says.
Vehicle sales in the U.S. reached 16.4 million in 2014, a 5.7 per cent jump over 2013 and the industry’s best showing since 2005. Demand has been especially strong for light trucks, which continue to grab market share away from passenger cars.
Vehicle sales in Canada have also been exceptionally strong over the past two years, the report said, reaching a record 1.89 million units in 2014.
The report also notes the importance of GM’s Oshawa, Ont. assembly plant remains, in particular the fact that the plant’s future is in doubt. The automaker is losing production of the Chevrolet Camaro to a plant in Lansing, Mich., at a cost of 1,000 jobs by the end of this year. Almost all of the jobs are being cut through early retirement incentives, the company has said.
But more layoffs may be coming next year with the expected shutdown of GM’s consolidated assembly line, which makes the Chevrolet Impala, the conference board says.
“If GM does not announce within the next two years that it is bringing new production to Oshawa, the whole plant could be shut down in the not-too-distant future,” the report said. “Needless to say, such a loss would have a big impact on the industry.”
The plant offers some competitive advantages, the report says – for example, nearly 2,100 of the 3,600 employees are retirement eligible and would be replaced with new, lower wage employees. But much will depend on what kind of deal the U.S. automakers strike with their own U.S. workers this year, and how that affects Canadian auto workers’ talks in 2016, the report added.