Canadian Manufacturing

Canadian car makers up $1.5-billion in projected profits

Industry has gone from $1.5-billion in losses in 2009 to an expected profit of $1.5-billion in 2012



Ottawa—Canada’s motor vehicle manufacturing industry has gone from $1.5-billion in losses in 2009 to an expected profit of $1.5-billion this year, according to a Conference Board of Canada report.

The Conference Board of Canada’s Canadian Industrial Outlook: Spring 2012 found the industry’s forcasted pre-tax profit of $1.5-billion in 2012 is its highest level since 2002, when the dollar traded at 62-cents U.S.

Profits are expected to stabilize at just over $1.5 billion annually in 2013 and beyond, according to the report, with fierce competition among the major automakers keeping profit margins low.

“The recovery of the auto industry is in full swing,” director of industrial economic trends Michael Burt said in a statement. “Consumers in Canada and the United States who held off new vehicle purchases in recent years are back in the showrooms to replace their older models.”

According to Burt, low interest rates, dealer incentives and new models are also boosting demand.

High fuel prices are also encouraging consumers to trade in older vehicles for more fuel-efficient cars and trucks.

In response to brisk sales, automakers will ramp up production by an expected 12 per cent this year, according to the Conference Board of Canada.

Canadian vehicle sales are expected to reach pre-recession levels this year, with the U.S. forecasted to return to its pre-recession sales total in 2014.

In addition to the revitalized Detroit companies, a rebound in production of Japanese automakers Toyota and Honda is underway following the supply disruptions caused by the 2011 earthquake and tsunami.

The Canadian industry will also benefit from moderating prices for raw materials and a weaker Canadian dollar, according to the report.

This is a silver lining for the industry in what remains a period of elevated risk brought on by the European debt crisis and slowing economic growth.

If U.S. job growth continues to wane in the months to come, Canadian auto exports will be negatively affected.

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