OTTAWA, June 16, 2011 /CNW/ - Canada's motor vehicle manufacturing
industry is feeling the effects of global developments in both the
United States and Japan. U.S. vehicle sales continue to rise from the
depths they reached during the recession. But the Japanese earthquake
and tsunami have disrupted production at Canadian automaking plants,
which could lead to rising prices for consumers as vehicle inventories
dwindle, according to The Conference Board of Canada's Canadian Industrial Outlook: Canada's Motor Vehicle Manufacturing
"After three years of losses, automakers finally posted a small profit
in 2010. Despite the supply disruptions caused by the Japanese
earthquake, profitability will increase this year thanks to rising U.S.
demand - Americans have not ended their love affair with cars," said
Michael Burt, Associate Director, Industrial Economic Trends.
The Canadian auto assembly industry can expect to post profits of almost
$1 billion in 2011, an increase from $114 million in 2010. Industry
revenues shot up by 29 per cent last year, and will rise another eight
per cent in 2011. After the industry slashed costs during the
recession, expenditures are expected to rise slower than revenues,
leading to an improved bottom line.
Driving revenues higher will be a continued recovery in U.S. light
vehicle sales. An estimated 84 per cent of Canadian-assembled vehicles
go to the United States, and sales there are on pace to exceed 13
million units in 2011. Although well above 2009 lows, there is still
significant room for growth. Normal market conditions would see sales
in the range of 16 million units per year.
The tragic earthquake and tsunami in Japan hit Canadian Toyota and Honda
plants particularly hard. In the second quarter of 2011, Toyota slashed
production by a startling 56 per cent and Honda cut production by 31
per cent due to the difficulty in obtaining parts. Primarily as a
result of the production shutdowns, the Conference Board expects
production to increase by 11.8 per cent in 2011, down from 15 per cent
in the Board's Autumn 2010 forecast. The production slowdown will be temporary - supply should
return to more normal levels later this year.
For consumers, one effect of the Japanese earthquake is likely higher
prices, as Toyota and Honda attempt to conserve their vehicle
inventories. The Detroit Three automakers - which are less affected by
the supply chain disruptions - may have an opportunity to gain
additional market share among car buyers.
For parts manufacturers, the jump in demand and significant cost
restructuring led the industry to a $255-million profit last year—the
first profitable year for the industry since 2007. Despite the current
turmoil in the industry, strong gains in production in the second half
of the year will lead to a profit of about $455 million in 2011.
Canada's cost-competitiveness, however, is eroding because of the
strong dollar. As a result, profit margins will remain below their
pre-recession levels through the forecast period.
SOURCE CONFERENCE BOARD OF CANADA
For further information:
Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448