Despite today’s announcement by General Motors about layoffs next year, and an industry-wide drop in production this year, continued efforts to reduce costs will allow Canada’s car manufacturers to post a small profit of $155 million in 2008, according to a report from the Conference Board of Canada.

“With the Canadian dollar remaining around parity and new car sales in the U.S. expected to fall to their lowest level since 1998, cost-cutting initiatives and streamlined vehicle lineups are critical to the industry’s recovery,” says Sabrina Browarski, economist. “Continued savings on labour and material costs and increased production should help boost industry profits starting in 2009.”

Production is expected to fall by 4.6% this year, as Canadian auto manufacturers feel the pinch from weaker U.S. demand. But the opening of Toyota’s Woodstock plant and new models-from Chrysler and General Motors-will boost production in 2009 and help offset the drop in production resulting from the closure of GM’s Oshawa truck plant.

In 2007, significant cost savings allowed manufacturers to reduce their losses to $430 million. Industry costs are expected to fall again this year, before rising in 2009, due to increased production and a stronger outlook for U.S vehicle sales.