Canada’s Auto and Auto Parts Industry: Industrial Outlook, Spring 2005

Following spectacular growth of 8 per cent in 2004, production growth in Canada’s auto and auto parts industry will come to a screeching halt in 2005, posting a meagre 0.1 per cent for the year and leaving industry profits at $3.6 billion.

The industry is struggling with weak exports due to the strong loonie, the rising cost of raw materials and softening demand. Labour costs are also eating into profits, as unionized and retired workers are costing more each year in wages and health care costs, leaving domestic producers like GM and Ford less competitive than Toyota, Honda or other manufacturers that assemble cars in countries with lower labour costs.

In 2006, output will grow by 3 per cent, leading to overall profits of $4.6 billion. From 2007 to 2009, overall profits will range between $4.5 billion and $5.3 billion, significantly lower than at the end of the 1990s and in 2000. Profit margins in parts production will be higher than those for assemblers.