Production expected to be highest since 2008

Vehicle production in Canada is set to hit 2.5 million units this year — the highest level since before the recession of 2008, a new report shows.

Strong sales in the U.S., which takes 80 per cent of Canada’s vehicle production, and also in Canada is helping drive the increase, according to the report by Scotiabank released Thursday.

“In the United States, passenger vehicle sales continue to gain momentum, with purchases revving up to an annualized 14.9 million units in September,” said Carlos Gomes, Scotiabank senior economist and auto industry specialist.

“That’s the highest level since March 2008 and well above the average of 14.2 million units during the previous eight months.”

Sales also remain solid in Canada, advancing 6 per cent year over year last month, and climbing to the second-highest level on record for the month of September.

The annualized total of 1.67 million vehicles was in line with the average of the past year.

That’s good news for Canadian auto assembly plants, Gomes said.

“Automakers are once again running their North American plants at full tilt, with several facilities either adding a third shift or scheduling overtime for the next several months to ensure that the industry has enough supply on hand to meet stronger than expected demand,” Scotiabank said.

“The improvement in vehicle production will help bolster manufacturing prospects at a time when durable goods orders in other sectors have been weak,” the report added.

The upswing comes as the Canadian Auto Workers union signs a new four-year contract with the Detroit Three.

The deal reached with Ford, General Motors and Chrysler cuts the automakers’ costs of new hires, while preserving existing employees’ wages and benefits.

Ford has pledged to create 600 new jobs, while GM would hire 1,750 over the life of the deal, offsetting most of the planned or existing layoffs at those automakers.

Chrysler has enjoyed the strongest sales gains in Canada of the Detroit Three automakers so far this year.

Both Toyota and Honda have also pledged to add new jobs at their Canadian plants in the new year.

Global vehicle sales enjoyed a good ride this summer, up eight per cent year over year in July and August, led by a double-digit boost in South America, the Scotiabank report also said.

Sales remained strong in China, up 11 per cent year over year, while softening in India and more recently in Japan with the end of government subsidies for eco-friendly vehicles.

After a summer manufacturing lull, auto assembly plants have started to ramp up across most of the world and will provide “a significant boost to manufacturing and overall economic activity in the final quarter of 2012.”

Russia and Brazil, which has been helping fuel vehicle sales with a $10million stimulus package, will lead the way as vehicle assemblies in both countries are scheduled to post double-digit, year-over-year increases.

In contrast, sales in Western Europe continue to deteriorate, with preliminary sales results for September pointing to at least a 15 per cent slump across the region, Gomes said.

“Even prior to the double-digit downturn in September, French and Italian automakers had announced work stoppages up to three weeks due to weak demand,” he said.

According to the report, compounding the pain for most European mass-market automakers is the loss of market share to manufacturers who have limited production in Europe.