Automakers face $2.1B loss this year: Conference Board of Canada

Canada's car assembly companies are heading for a $2.1 billion loss this year, but 2009 may be the bottom for the industry, a Conference Board of Canada report released Thursday says.

"Automakers are bracing for more difficult months ahead and 2009 will be one of the most challenging years for the industry," economist Sabrina Browarski said in the report.

However, the 2009loss is less than the $2.7 billion loss in 2008.

And the board is forecasting strong sales increases and smaller losses in 2010and 2011, with a possible small profit in 2012 if industry restructuring is successful and U.S. demand recovers.

The companies are forecast to slash about $16 billion from costs this year by cutting jobs and production, but sales will drop at about the same rate, Browarski said.

Canadian production fell 21 per cent last year, with another36 per cent drop predicted for this year, "bringing production back to 1992 levels."

An estimated 13,400 assembly jobs will disappear this year, leaving the industry with 51,100 employees in Canada. There were 83,300 in 2005, but employment will only rebound to 59,900 by 2013, the report said.

Exports lead the way down

The Canadian industry, heavily dependent on exports to the United States, is suffering from falling U.S. consumer demand,as 2009outlays on autos and parts are predicted to fall tothe lowestshare of consumer spendingsince 1961.

"In terms of units, new vehicle sales will fall to 9.56 million units in 2009 the lowest level on record and will rise only slightly to 9.7 million units in 2010," the report said.

Canadian manufacturerswillreduce outputby 36 per cent this year, "the result of a nearly 57 per cent cutback in exports!"

The report is based on the assumptions that General Motors will survive and the Chrysler restructuring will work.

"The process of restructuring will be laborious, delayed, and contingent upon continued government support of GM and Chrysler."

Even industry leaders are suffering. Toyota, which has displaced GM as the No. 1 automaker, recently warned thatit expects to lose about $5.5 billion US in the year endingMarch 2010,worse than the $4.4 billion loss in the year ended March 2009.