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Canadian Auto Industry to Book $155 Million in Profit This Year
Aug 26, 2008

The Canadian automobile industry is expected to see profit of $155 Million this year on account of low operating costs and launch of new models.

The Conference Board of Canada said that the Canadian automobile industry should yield a profit of $155 Million (C$ 154 Million) in 2008 though there is a significant drop in the output on account of closure of plants and considerable job cuts, as reported by
REUTERS.

The board disclosed that the industry cut 8,500 jobs in assembling segment of auto industry last year and reduced material costs that enabled the industry to bring down operating costs by 5.6%. The industry is expected to furth     er lower the operating costs by 10.5% this year. In addition, the industry gained value from fiscal relief, measures to tame inflation and strong labor market as the sales of automobiles and auto parts moved up by 6.2% last year.

The projection for high growth in the Canadian automobile industry is based on the auto manufacturers’ efforts for reducing costs that result in good profit. Moreover, continued reduction in labor and material costs, along with increased production, is likely to increase profit in the country’s automobile industry.

Furthermore, several new technologically-advanced vehicles are lined up for launch this year as manufacturers are gradually pulling back models giving low margins to focus on their more popular and profitable models. This will also help industry gaining good profit in 2008.

Apart from these reasons, the operating cost in Canada is lower than that in the US on a common currency basis, along with lower dollar value, increasing the profit of auto sector in the country. Low dollar value and cost competitiveness are expected to boost investment in the industry, which, in turn, raised the profit.

However, the Conference Board of Canada forecasted that the industry might see a rise in profit but the production is likely to drop to the lowest level in a decade this year as market is continuously facing slowdown.

A Research Analyst at
RNCOS said, “The Canadian automobile industry is expected to earn good profit this year due to reduction in cost and rising sales of passenger cars and light trucks in the domestic market. Hence, the auto manufacturers should launch attractive and advanced models as the current demand is favoring business. Moreover, the makers should recover their losses as quickly as possible because the demand might not remain the same as it is now.”

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