Growth in Canadian automobile production will come to a halt this year even as profits rise, the Conference Board said today.

“Weaker export demand in the U.S. market will lead to three consecutive quarters of declining production,” associate director Louis Theriault said in a news release.

“Despite this stall in production, efforts to reduce material and labour costs will improve profits compared to 2004. Still, the industry is a long way from the heady profit levels and margins enjoyed in the late 1990s.”

The Conference Board’s Canadian Industrial Outlook: Canada’s Auto and Auto Parts Industry forecasts auto exports to decline, limiting production to meagre growth of 0.1% for 2005.

“The Big Three auto manufacturers are facing structural challenges, as they are losing market share to foreign manufacturers that enjoy lower labour costs,” the Conference Board said.

“Another factor putting downward pressure on medium-term profit margins is higher gasoline costs, which are affecting sales of specific models such as SUVs.”

Revenue will remain flat for the second straight year, but declining costs will help industry profits rise from just $1.4 billion in 2004 to $3.6 billion this year.

“As production picks up next year, profits are expected to increase gradually, exceeding $5 billion in 2008,” the board said. “Consumers can expect rising prices as dealer incentives are phased out.”