Ottawa: The auto parts industry in Canada has seen the loss of 32,000 jobs since a peak in 2004. The strong Canadian dollar and stiff foreign competition, specially from China and Mexico, combined with declining US consumer demand for new vehicles are expected to cut profits for Canada's auto parts manufacturers in 2008, according to the Conference Board's Canadian Industrial Outlook: Canada's Motor Vehicle Parts Manufacturing Industry - Spring 2008.

The board predicts a fall in output by around 8 per cent resulting from a drop in US demand, a stronger Canadian dollar, and continuing price pressures. The board also said the sector's revenue in Canada will dip around 2 per cent to $27.9 billion, while profits will dive around 15 per cent to $1.5 billion in 2008.

The report says employment in Canada's auto parts sector will stabilise somewhere between 107,000 and 108,300 workers by 2012, along with profit margins which will first see a down slide this year, and then stabilise thereafter between 5.7 per cent to 5.8 per cent. The Conference Board's forecast gives a peek into the future that is usually obscured by more to-date happenings and news of job losses and plant closures that the media prefers to print.

"Given that the US accounts for the majority of Canadian auto parts exports, factors such as the strong Canadian dollar and weak American demand will continue to negatively affect the industry's performance in 2008," said Sabrina Browarski, Economist at the Conference Board.

Despite aggressive price cuts and sales incentives, American motor vehicle sales this year are expected to decline to their lowest level since 1998. Consequently, auto parts production in Canada is forecast to fall by eight per cent in 2008, the third consecutive year of declining production.

According to report, a new Honda Motor Co. engine manufacturing factory in Alliston, Ontario and parts makers setting up shop along the fringes of Toyota's new RAV4 assembly plant in Woodstock, Ontario will give a leg up to supplier activity and output by around 3.4 per cent starting 2009 right upto 2012.Browarski also said that steady Canadian and US manufacturing operations at Ford Motor Co., General Motors Corp., and Chrysler LLC resulting from new labour contracts that last until 2011, along with corporate tax relief from the federal and provincial governments as per their latest budgets will also help suppliers.

The Ontario government has committed $650-million under the Next Generation Jobs Fund to promote new environmentally sustainable transportation technologies, along with $1-billion in tax relief for the auto sector by 2013. It also plans to spend $50-million per year for five years on a new automotive innovation fund that is geared to capitalise large scale research and development projects for more fuel-efficient vehicles.

In line with declining production this year, profits are expected to fall by 14.7 per cent to $1.5 billion, before rebounding beginning in 2009, the board said.