TORONTO - The Canadian auto industry will lose a staggering 15,000 jobs by the end of 2009 as a "maelstrom" of change sweeps through the sector, according to an economist with the Conference Board of Canada.
The latest projection from the non-profit research organization predicts the industry will lose $1.7 billion this year as new vehicle production declines by 15.3 per cent.
Conference Board economist Sabrina Browarski said the drop is attributable primarily to reduced demand for new vehicles in the U.S.
Production is expected to reach an eight-year low in 2009, adding up to another $1 billion in losses.
Browarski said the total damage will likely come to 15,000 lost jobs in the vehicle assembly sector alone, with even more expected at auto parts manufacturers and other spinoff industries.
"We haven't seen job losses like this for years," Browarski said in an interview.
Canadian Auto Workers economist Jim Stanford said approximately 7.5 jobs depend on every one job at a vehicle assembly plant.
"So that 15,000 jobs lost would eventually translate into over 100,000 jobs lost in the national economy when you add up the spinoff effects," Stanford said.
The Conference Board report said the automakers are caught in a "maelstrom of cyclical and structural industry changes" and it's a trend unlikely to improve until 2010.
While the struggling industry is experiencing structural shifts, most of the negative trend in sales can be attributed to a cyclical slump in demand as U.S. consumers prepare for a recession, Browarski said.
"I think because we're seeing such a slowdown in U.S. consumer demand ... it's going to be a waiting game for the automotive sector and we have to wait for the employment numbers to stabilize and for incomes to stabilize before we start to see any resurgence."
The Conference Board predicts five consecutive quarters of declining consumer confidence and demand, which could send U.S. vehicle sales in 2009 to a level not seen since 1992, Browarski said.
Exacerbating consumer reluctance to buy new vehicles is a shortage of credit.
GMAC Financial Services -- the finance arm of General Motors -- is restricting its loans to people with credit scores over 700, "which is really the upper echelon of creditworthiness," Browarski said.
This means the 43 per cent of Canadians who lease their vehicles and the 20 per cent of Americans who do the same are increasingly likely to delay getting a new vehicle until credit markets loosen up.
"Clearly the credit freeze, which is affecting car buyers and the whole industry, is causing this current emergency," said Stanford.
"The problem is that this crisis is so bad, some of the companies could go under, and in that case you won't get a recovery, you'll experience a permanent loss."
The Detroit Three North American auto manufacturers -- GM, Ford and Chrysler -- have been struggling to survive amidst slumping demand and a general economic slowdown.
GM reported a US$2.5-billion loss in the third quarter and Ford Motor Co. said it lost $129 million in the same period.
Both GM and Ford have announced plans to lay off thousands of workers as they try to cope with plunging sales.
The automakers are seeking US$25 billion in government loans to help them survive the worst sales downturn in 25 years, and it's still unclear what portion of that bill Canada could end up footing.
Browarski said a bailout is unlikely to have much impact on employment or production numbers in the short term.
"The cyclical nature of the industry will probably dominate regardless of the event of a bailout package," she said.
But Stanford said some kind of government assistance is necessary simply to "keep these companies alive until auto sales do bounce back."
"Clearly we're going to experience downtime and layoffs in the short run, but what we don't want is for that to turn into a long-run loss of the whole industry," he said.
"(An aid package) is a bridge to the other side of this chasm that's been created by the financial crisis."
