Kai Hospelt scored twice during an extended tiebreaker and goaltender Daniar Dshunsussow stood tall as Wolfsburg Grizzly Adams beat Canada 3-2 on Thursday.
The Canadians looked poised to advance at the world's oldest pro hockey tournament even after Christopher Fischer tied the game with less than nine minutes remaining. But Canada was unable to capitalize on a late power play as Dshunsussow closed the door for the German club team.
He went on to stop three of four Canadian attempts in the shootout while Hospelt twice beat Marty Turco — the first ricocheting off a post and requiring video review by the referee.
John Laliberte and Fischer scored in regulation for Wolfsburg, which moves on to face KHL team Dinamo Riga in the semifinals. Dshunsussow finished with 27 saves in regulation and added three more in the shootout.
Domenic Pittis and Kurtis McLean replied for Canada, which had appeared in nine of the last 11 Spengler Cup finals.
Turco finished with 29 saves after winning his opening game at the tournament. The veteran NHLer is still hoping to catch on with a team in North America.
The Canadians were coming off a disheartening 8-1 loss in the round robin to HC Davos but got off to the start coach Marc Crawford wanted. Pittis had his pass into the slot deflect off a Wolfsburg defender and in at 13:29 of the first period.
Laliberte tied it soon after but McLean restored Canada's lead at 17:19 of the second frame by knocking in a rebound. Fischer's tying goal came on a power play at 11:31 of the third period on a point shot through traffic.
Canada pressed late in the third period and throughout overtime but couldn't solve Dshunsussow. Joel Perreault was the only shooter to beat him in the shootout.
It brought an abrupt end to the six-team tournament for Canada, which last captured the Spengler Cup in 2007.