CANADIAN AUTOMAKERS MAKE SHARP U-TURN BACK TO PROFITABILITY

OTTAWA, Dec. 7 /CNW/ - The restructuring in the auto sector is starting to pay off for Canada's automakers - the industry is expected to return to profitability this year, according to The Conference Board of Canada's 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. 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," said Michael Burt, Associate Director, Industrial Economic Trends.

After three consecutive years of steep losses, the Canadian industry is forecast to post a profit of $300 million this year. Profits are expected to approach $1 billion next year and to surpass $2 billion annually by 2015.

The massive restructuring of General Motors and Chrysler has borne fruit in the form of 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 it is expected to rise by another 15 per cent in 2011. But output will still remain below where it stood prior to the recession because of continued weakness in U.S. vehicle sales. It will not be until 2014 that Canadian production returns to its pre-recession levels.

For further information:

Brent Dowdall, Media Relations, Tel.: [phone] ext. 448
E-mail: [email protected]