The Canadians finished fourth in their heat Saturday and will now need a top-four finish in Monday's repechage to book their ticket in the final at Dorney Lake.
"We're unhappy," said Victoria's Malcolm Howard. "We didn't do what we set up to do. We'll have to improve on Monday."
Powerhouse Germany set the pace in rowing's blue-ribbon event, finishing first in Canada's heat with a time of five minutes 25.52 seconds. Britain was second, followed by the Netherlands. Canada finished last, a whopping 12 seconds back in 5:37.91.
The U.S. won the other heat to join Germany in Wednesday's final.
Canada won the gold at the 2008 Beijing Games but only three rowers from that team — Howard, Andrew Byrnes of Toronto and coxswain Brian Price of Belleville, Ont. — remain on this year's revamped crew.
Howard is confident the team, which posted a world-best time at a World Cup in May, can rebound Monday.
"There's no doubt about our speed," he said.
Canada's team also includes Gabriel Bergen of 100 Mile House, B.C., Douglas Csima of Oakville, Ont., Rob Gibson of Kingston, Ont., Conlin McCabe of Brockville, Ont., Jeremiah Brown of Cobourg, Ont., and Will Crothers of Kingston.
The Germans have dominated the men's eight recently, winning the last three world championships and remaining unbeaten for three years.
"They are basically the class of the field," U.S. men's coach Mike Teti said. "I've seen them in practice, I have seen them on film. Now I saw them live in person. They are very, very good."
A packed crowd, treated to sunshine in relatively still conditions, later collectively gasped in astonishment as New Zealand's Hamish Bond and Eric Murray broke a world best time in the pair that had stood for 10 years.
The Kiwis surged to victory in the first heat in 6:08.50 seconds — easily surpassing the previous best time of 6:14.27 minutes posted by Matthew Pinsent and James Cracknell of Britain in Seville in 2002.
Rowing doesn't refer to such marks as world records because the conditions are different at each venue.
Canadians Scott Frandsen of Kelowna, B.C., and Dave Calder of Victoria, silver medallists in Beijing, won their heat in 6:23.80 to advance to the semifinals.
"It was a solid race," said Frandsen. "A good first step. We got into the race, got well into our rhythm and were in control. We knew where the finish was."
Frandsen and Calder both retired after the Beijing Games but then decided to take one more shot at a medal in London. Frandsen said the Kiwi time was ''definitely impressive."
"But we're not racing times," he said. "We're racing them."
With conditions relatively still, with a slight tailwind, that wasn't the only mark set on the man-made course 25 kilometres west of London.
Helen Glover and Heather Stanning of Britain broke a 16-year Olympic best held by Australia by more than four seconds when they won the first heat of the women's pair in 6:57.29, a length clear of an American boat that also qualified.
"This was the biggest crowd ever but we were very much in our own boat, we stuck to our race plan and did not get distracted," said Stanning, who hasn't lost a race with Glover this season.
They are competing in the regatta's first final Wednesday and are looking to become the first British women to win Olympic gold, after so many years of success in the men's squad led by rowing greats Steve Redgrave and Pinsent.
In the ultra-competitive men's single sculls, Tim Maeyens of Belgium — hardly mentioned as a gold-medal contender — had an Olympic best time of 6:42.52 minutes, bettering Xeno Muller's mark set 16 years ago at the Atlanta Games by more than two seconds.
All the usual contenders qualified, including Mahe Drysdale of New Zealand who beat reigning two-time Olympic champion Olaf Tufte by 11 seconds to storm to victory in their heat.
Ekaterina Karsten is looking to win a medal at a sixth straight games and the 40-year-old Belarusian got her single sculls campaign off to a strong start by winning her heat in the last race of the day, as the weather cooled and the crowds drifted away.
World champion Germany and in-form Ukraine qualified directly for the final of the women's quadruple sculls by winning their heats.
New Zealand reached the semifinals of the men's double sculls as the quickest boat but Olympic champion Australia slumped into the repechage by finishing fourth in its heat.
Michael Braithwaite of Duncan, B.C., and Kevin Kowalyk of Winnipeg finished fifth in their heat in 6:34.11 and will race in the repechage.
Britain, which is tipped to top the rowing medals table come the end of the eight-day regatta, was fastest in three heats of the lightweight men's four, although there are still semifinals to be rowed in that event.
The Germans in the eight were unhappy after the draw Thursday because they were placed in a heavyweight heat with the defending champions, a host nation that is a dark horse for gold and a powerful Dutch crew.
They needn't have worried.
Powering into an early lead, Germany established clear water within 500 metres. Britain, starting with a fully fit crew for the first time this season, closed the gap slightly by the end but the Germans coasted home.
The Americans traditionally dominate this event — which has a billing similar to that of the 100 metres in track — but failed to qualify directly for the Olympics for the first time. They needed a victory in a final qualifying regatta in May to squeeze into the games.
But under coach Teti, they looked impressive Saturday. They were graceful and smooth and had too much for Australia and Poland, which came to London in form after winning the final World Cup event in Munich last month.
"It's the first time they've won a race at a world championship or Olympics," Teti said. "To win the heat gives them a bit of confidence. But they are going to have to really go to another level (in the final)."
— With files from The Associated Press
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