Profits and employment in the Canadian auto and auto-parts industries are expected to recover next year, according to the Conference Board of Canada.

An outlook from the private-sector research group released today predicts total auto industry profits of $2.1 billion in 2007, up 62% from this year, but still “well below” profit levels from the late 1990s.

The Conference Board credits the ongoing massive restructuring in the sector.

“Automakers are investing billions in new and upgraded plants and equipment, which is evidence that the auto sector in Canada is not fading,” said Louis Thériault, director of the board’s Canadian Industrial Outlook Service, in a news release.

“Instead, it is going through significant structural changes that should eventually lead to stronger production growth and improved profitability.”

The Canadian auto industry has been shedding jobs since 2003, but the board forecasts that employment growth will resume next year as Japanese and North American automakers implement major new investments and build new plants.

Toyota and Honda have both announced plans to build new Ontario plants set to open in 2008.

The board said its outlook faces several risks, including continued strength of the Canadian dollar, the purchasing power of consumers in the key U.S. export market, and competition from low-cost imports.