Canadian manufacturers who export a lot of their product into the United States can make it through any economic recession if they follow a few simple steps, according to a new report from Deloitte consultants.

The report, titled The Currency Crunch: Addressing market volatility and solutions for manufacturers, makes recommendations that can apply to almost any Canadian manufacturer, says one of the authors, Luc Martin.

"Any recession or economic downturn is actually good because it almost forces people to look at how they do business," he says in an interview. "You have to look at not just your costs, but ways you can diversify or become more flexible."

The report suggests manufacturers focus on top-line growth by rethinking their pricing strategies and identifying their distribution channels - and customers - with the highest potential.

Countries such as China and India with strong GDP growth can offset any economic downturn in North America.

But business owners need to balance that potential against other factors like higher shipping costs before making any decision, says Martin, who is also Deloitte's national manufacturing industry leader in Canada.

"We are telling our clients to carefully assess the risk first. One example of a significant risk is seasonal products.

"If you are manufacturing bathing suits, you want to make sure they can reach store shelves before the end of summer," he says.

Companies should also look at employee satisfaction and retention heading into difficult times.

Communicate objectives to employees and make sure incentives are tied into those growth areas, says Martin.

The report adds business owners should also involve their finance team as much as possible. They can suggest hedge contracts, for example, to guard against short-term currency fluctuations.

But Jayson Myers, Ottawa-based president of the Canadian Manufacturers and Exporters Association (CMEA), says that doesn't make a difference if major customers aren't buying.

"The biggest problem right now is the downturn in the U.S. market," he says.

"Currency fluctuations have died down, but if customers aren't buying your product then that's still a big issue."

Currency fluctuations and the continued threat of an economic recession in the United States have led to oversupply with a lot of North American manufacturers, Myers says.

CMEA statistics show the value of manufacturing output has more than doubled from about $22 billion per month in 1992 to about $50 billion per month last year. The early numbers in 2008 are starting to drop, however.

According to notes accompanying a recent presentation Myers gave, one of the biggest drops was in mid-1998 when labour action hit an automotive brake plant and shut down the entire GM supply chain.

"This shows how complex manufacturing supply chains are, and how important the auto industry is - production dropped by 10 per cent in two months, then recovered after the strike ended."

Auto industry analyst Dennis DesRosiers says in a note to clients that auto sales in the first two months of this year were up 20 per cent over last year.

"There are a lot of bright spots and reasons for optimism for light-vehicle sales in Canada, starting first with prices," he writes.

"Statistics Canada tracking of transaction prices so far this year indicates prices have dropped by about five per cent, which is huge by any measure. Drop prices and sales increase ... a simple formula."

DesRosiers adds other reasons for optimism in the auto industry would be the GST cut earlier this year, a dollar hovering at about par and "the Canadian economy holding its own compared with south of the border.

That declining U.S. market also means popular vehicle models are being shipped to Canada and more available to consumers.

A Royal Bank forecast issued earlier this month suggests Canadians will have a tough year, especially in Ontario with its export-heavy economy.

RBC chief economist Craig Wright says in the report a "heavy drag" from the trade sector could push Ontario right on the brink of a recession, with the province experiencing sub-one- per-cent growth in 2008 and 1.9-per- cent growth in 2009. Any slowdown, however, would be brief due to factors like a healthy real estate market and rising wages.

Meanwhile north of Toronto, Leslie Amoils, president of Infinity Asset Solutions, said his business at his industrial auction company is way up, handling the sale of equipment from companies that have gone under or scaled down.

"Listen, you have the rising Canadian dollar and the volatility of the dollar that have created all kinds of problems for these guys. They didn't have time to react to the currency fluctuations. It's an absolute bloodbath," he says.

"Canadian manufacturing is being decimated. Now, please don't misunderstand or misquote me because I deal with the smaller mom-and-pop operators, but this is a rough time for them right now."

Asked if he had seen any other time periods like this one during his more than a decade in business, Amoils says "absolutely not."

"What I see happening right now is permanent, or at least it's going to be around for quite a while," he says.

Deloitte's Martin declined to predict what he felt might happen to the Canadian dollar or the economy this year.

"That's a tough question. I'm not an economist, but historically the dollar has closely followed fluctuations in oil prices," he says. "I'm not sure what to think this time, though."

(David Hatton can be reached at hatton@businessedge.ca)