TORONTO -- Canadian auto production will stall this year on weak demand and a strong domestic currency, but material and labor cost cuts will more than double profits, a Canadian research organization said on Tuesday.
"Weaker export demand in the U.S. market will lead to three consecutive quarters of declining production," said Louis Theriault, an associate director at The Conference Board of Canada, in an industrial outlook on Canada's auto industry.
With North American demand softening and the Canadian dollar remaining robust, auto exports are expected to decline, limiting production to growth of 0.1 percent for 2005.
Revenue will remain flat for the second straight year in 2005, but labor and material cost cuts will help profits rise from just C$1.4 billion ($1.1 billion) in 2004 to C$3.6 billion this year, the report said.
Production is expected to pick up next year and profits are seen rising gradually to more than C$5 billion in 2008 as prices rise again and dealer incentives decline.
"Still, the industry is a long way from the heady profit levels and margins enjoyed in the late 1990s," Theriault said.
General Motors, Toyota, Ford Motor Co., DaimlerChyrsler and Honda have plants in Canada.