By Shawn Wright, Automotive News
Detroit, Illinois -- Wilbur Ross, chairman of International Automotive Components Group, said 13 Jan that the US cash-for-clunkers programme last year was feeble and poorly administered compared with a similar programme in China.
China said last month that it will extend its cash-for-clunkers programme, which began about mid-2009, into the early part of this year. Ross told the Automotive News World Congress that the US should do likewise, and as soon as possible.
"They should do it tomorrow morning. They need it," Ross said after his speech. "It's nice that we're going to have more volume, say a million and a half units, but that still isn't going to solve the unemployment problem in this country. We need to get to much bigger levels, and I think that's one very efficient way to do it."
The US budgeted $3000 million for its cash-for-clunkers programme, while China's plan calls for $14 800 million in tax breaks and subsidies for car purchases, according to The Wall Street Journal.
Ross said that the fair amount of growth in the US economy in the third quarter of 2009 was the result of the cash-for-clunkers programme and first-time homebuyer subsidies that the government offered.
Ross believes that the next 10 years will see a renaissance of the auto industry, which he predicted will shift to a more successful business model. He sees 2010 as a starting point for this recovery, in part because the negative effects of the General Motors and Chrysler bankruptcies will be absent. In addition, there is increased availability of credit for dealers' floor-planning and for financing customer purchases.
Ross, who as ceo of investment firm W.L. Ross & Co. created International Automotive Components by buying the defunct Collins & Aikman Corp. and the interiors business of Lear Corp., said he expects more suppliers to go out of business this year, even as the economy ramps up and demand for automobiles increases.
As the industry begins to ramp up, he said, suppliers will need more working capital. "They'll first have to build inventory," before they can sell the parts, he said. "Many of the companies are finding their lenders will not provide the funding, so they'll literally go out of business because they can't finance the ramp-up."
Last September, IAC purchased German carpet and acoustics supplier Stankiewicz GmbH. Asked whether he was interested in picking up some more suppliers, Ross said, "As many as make economic sense."
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