OTTAWA – A new report paints a potentially bleak picture for the future of Ontario’s key auto sector.

The paper from Royal Bank economist Josh Nye notes the sector has yet to fully recover from the 2008-09 recession, languishing below pre-slump levels in production, exports, jobs and investment.

Overall, the sector is 15 per cent below pre-recession levels in terms of shipments with only 20 per cent of the 43,400 jobs lost having returned — making it one of the worst performing manufacturing industries.

This despite the fact motor vehicle sales have rebounded strongly, hitting a record 1.8 million in Canada last year and a strong 15.9 million in the United States.

The problem, says Nye, is not so much the recession hangover but what appears to be a shift in North American production to Mexico and the southern U.S. states.

The report notes there has been a partial recovery in the past four years or so — from the 43 per cent crash that occurred between 2007-2009 — but the shift south will likely mean future growth in Canada will be restrained.

And should capital investment remain at recent lows, Canada’s auto industry will likely continue to lose ground.

The report follows a warning from union economist Jim Stanford that the industry will face major impediments from the implementation of Canada’s free trade agreements with Europe and Korea, and possibly a future deal with Japan — three markets that enjoy an overwhelming auto trade advantage with Canada.