Layoffs, losses seen for Canada auto parts sector

Thu Jun 18, 2009 11:45am EDT
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TORONTO (Reuters) - The Canadian auto parts sector will shed 36,000 jobs in 2009 as companies respond to the sharp decline in vehicle production, the Conference Board of Canada said on Thursday in its twice yearly outlook for the industry.

The companies are also expected to lose C$173 million ($153 million) this year as production drops 39 percent. In 2008, they posted a C$109 loss, the board said.

Canada's parts makers will cut costs by 34 percent this year, which will include reducing staffing by one-third, in response to the weaker volumes as the global recession slashes sales of cars and light trucks.

"Conditions will be undeniably difficult in 2009, and many small and medium-sized firms could potentially go out of business," Sabrina Browarski, a Conference Board economist, and author of the outlook, said in a release.

"The larger manufacturers, however, stand to increase their global market share when U.S. demand for automobiles starts to recover in 2010."

The industry is expected to return to profitability beginning next year with a profit of C$222 million. By 2013, the board said, profit margins are expected to return to historical norms.

General Motors Corp and Chrysler have been hit hard by the recession. Both are operating under U.S. bankruptcy protection and have temporarily shut down their North American plants to reduce inventory.

The board said its medium-term outlook for the industry is based on the assumption that GM will successfully exit bankruptcy protection, and Chrysler will be restructured under a stable partnership with Italy's Fiat SpA.

Chrysler said on Wednesday it would resume production at seven of its plants by the end of June.

($1=$1.13 Canadian)

(Reporting by John McCrank; editing by Rob Wilson)