Auto industry set to recover in 2010
December 22, 2009
Sales in the U.S., the destination for 84 per cent of Canadian-made autos, are expected to edge up to 11.6 million units in 2010 — well below the approximately 16 million averaged over the past decade.
Sales in the U.S., the destination for 84 per cent of Canadian-made autos, are expected to edge up to 11.6 million units in 2010 — well below the approximately 16 million averaged over the past decade.
OTTAWA — Canada's auto industry will return to profitability in 2010 after enduring a year that shook the sector to its core, the Conference Board of Canada said in a report Tuesday.
The board forecasts auto manufacturing, a cornerstone of southern Ontario's manufacturing hub, will deliver earnings of $263 million in 2010, after suffering a pre-tax loss of $2.3 billion in 2009.
"The Canadian auto industry appears to have turned a corner in the second half of 2009 and is expected to return to profitability in 2010," said board economist Sabrina Browarski.
"However, production will remain below historical levels. Manufacturers will have to make concerted and ongoing efforts to streamline product lineups, control costs, and innovate to maintain profitability."
Despite the Canadian sector's relatively quick return to profitability, the fallout of the financial crisis will continue to be felt for years in the U.S., "creating a ripple effect that will be acutely felt by Canadian motor vehicle exporters well into the medium term," Browarski said.
Sales in the U.S., the destination for 84 per cent of Canadian-made autos, are expected to edge up to 11.6 million units in 2010 — well below the approximately 16 million averaged over the past decade.
As a result, employment in the sector will grow only gradually over the next five years, from 52,000 in 2009 to 67,500 in 2014, still far below the 82,000 employed in 2006.
Meanwhile revenues, which plunged by nearly half from $61 billion in 2007 to the $31 billion forecast for 2009, will rise 38 per cent to $43 billion in 2010, the board forecasts. By 2014, they should return approximately to the $60-billion level last reached in 2007.
Production in Canada slid 22 per cent in 2008 and virtually came to a stop in the first quarter of 2009 as General Motors and Chrysler fought for their survival and plants were closed or temporarily shut down, requiring Canadian governments to provide nearly $25 billion in direct assistance to Chrysler and General Motors alone.
Over that time, the real value of production, in 2002 constant dollars, fell from its peak of $87 billion in 2007 to a forecast $47.3 billion in 2009. It will return to $84 billion in 2014, the board forecasts.
In terms of units produced, 2,082,241 light vehicles were produced in 2008. Assuming November and December monthly production is equal to October 2009's levels, then a total of 1,504,712 light vehicles will be produced in 2009, the board said.
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Auto industry set to recover in 2010
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