Automobile production in Canada stalls in 2005
Canadian automobile production will screech to a halt in 2005, according to a recent report from the Conference Boa...
Canadian automobile production will screech to a halt in 2005, according to a recent report from the Conference Board of Canada (Ottawa,ON).
"Weaker export demand in the US market will lead to three consecutive quarters of declining production," said Louis Theriault, associate director of the Conference Board’s Industrial Outlook wing (Quebec City, QC). "Despite the stall in production, efforts to reduce material and labor costs will improve profits compared to 2004. Still the industry is a long way from the heady profit levels and margins enjoyed in the late 1990s."
With North American demand softening and the Canadian dollar remaining strong, auto exports are expected to decline, limiting production to a meagre growth of 0.1% for 2005.
In particular, the Big Three are facing structural challenges because they are losing market share to foreign manufacturers who compete with low labor costs.
Additionally, higher gasoline costs are affecting sales of specific models, such as sports utility vehicles (SUVs). Overall, revenues will remain flat for the second straight year in 2005, but declining costs will help the industry’s profits rise from $1.4 billion in 2004 to $3.6 billion in 2005.
As production picks up in 2006, profits are expected to increase gradually, exceeding $5 billion in 2008.