Oct 10, 2008 - 07:50 AM

Tony Van Alphen, Torstar news services

Comments (0)

The casualties in Canada's reeling auto sector would increase significantly under a forecast that doesn't see a recovery in the key U.S. vehicle market until at least 2010, an industry leader says.

Gerald Fedchun, president of the Automotive Parts Manufacturers' Association, said Thursday that the gloomy forecast by J.D. Power and Associates would mean a lot more struggling companies here won't survive because they depend on U.S. demand.

"There would be many companies, particularly smaller ones that rely on the U.S., who simply won't be able to make it if they have to wait that long," Mr. Fedchun said in an interview from the struggling industrial city of Windsor.

"So many are already at risk or on the edge.

"We had expected it would be 10 months to a year before things would turn around, but 18 months would be far more than they could take."

A soaring dollar that makes exports more expensive, higher energy and commodity costs and stiffer offshore competition have hampered domestic parts makers in recent years.

Mr. Fedchun also noted that if the J. D. Power forecast holds, some assembly plants in Canada will probably need to cut more production.

Canada exports more than 80 per cent of its auto output and 60 per cent of parts production to the U.S.

In recent months, automakers in Canada have scheduled more weeks of downtime and cuts in shifts.

General Motors plans to phase out production of the truck plant in Oshawa next year, while Ford and Toyota cancelled new shifts in Oakville and Woodstock, respectively, before they started.

U.S. auto sales will end up tumbling about 13 per cent, or more than two million vehicles, to 13.6 million units this year.

J.D. Power, a leading U.S.-based market research firm, said in its latest auto forecast that the American market will drop by another 400,000 cars and light trucks, or 3 per cent, next year to 13.2 million. The firm also suggested that 2010 remains uncertain.

"Falling trade-in equity, fewer leasing options, credit market restructuring and the increased migration to used vehicles are all putting added pressure on the U.S. new vehicle sales market in 2009," said Jeff Schuster, executive director of automotive forecasting for J.D. Power.

"Any truly pronounced recovery appears to be more than 18 months away."

Mr. Fedchun also noted the market slide in the U.S. is deepening because of tightening credit for dealers and consumers.

Meanwhile, auto sales in Canada are up a surprising 1.4 per cent, or more than 18,000 vehicles, in the first three quarters. J.D. Power expects business to hold until the end of the year and reach 1.69 million cars and trucks.

The firm estimates Canadian sales will dip only by only about 10,000 vehicles to 1.68 million in 2009.

Some analysts think the Canadian market, which has bucked the U.S. trend this year, will also soon start experiencing monthly declines.

In other markets, J.D. Power lowered its earlier sales forecasts for China, India and Europe.

"While the global automotive industry is clearly experiencing a slowdown in 2008, the global market in 2009 may experience an outright collapse," Mr. Schuster said.

"While mature markets are being impacted more severely than emerging markets, no country or region is completely immune to the turmoil."

-- Tony Van Alphen is a business reporter with the Toronto Star