Ross cautions against carmakers' expanding lineups

AUTOMOTIVE NEWS

Published: January 17, 2013 1:44 pm ET
Updated: January 17, 2013 1:55 pm ET

Related to this story

Topics Automotive, Insert molding
Companies & Associations International Automotive Components Group North America LLC

DETROIT -- Automakers' attempts to boost sales and profits by broadening their U.S. lineups could backfire, billionaire private-equity investor Wilbur Ross said Wednesday.

"Everybody seems to be expanding their product line and you wonder if that isn't going to lead to problems," Ross, CEO of private equity firm W.L. Ross & Co., told the Automotive News World Congress. "It may lead to some more volatility in market share, and it may lead to, in effect, overcapacity in particular segments."

That could undo some of the financial benefits the Detroit 3 and other automakers have realized by better matching output with demand in recent years, he said.

Ross did not name any examples, but at the Detroit auto show, several automakers are showing vehicles in segments where they currently do not compete.

Volkswagen AG, which is targeting a big increase in U.S. sales in the years ahead, revealed a family-hauling crossover concept called the CrossBlue. Kia Motors America introduced a premium sedan, the 2014 Cadenza, following its affiliate Hyundai Motor America into the luxury-car segment.

Ross, 75, who also is chairman of the supplier International Automotive Components Group, said he expects U.S. auto sales to reach at least 15 million vehicles this year, which is in line with many projections by analysts and economists. That would represent an increase of roughly 500,000 units.

In contrast, he said sales in Europe would continue their slide, falling perhaps 400,000 units in 2013. Sales last year in Europe totaled 12.05 million, the fewest since 1995.

In other comments, Ross said:

  • Hybrid cars will eventually become "unnecessary" as electric and natural gas-powered vehicles grow in popularity. "Technology eventually will overcome the problems of price, range, weight, bulk and recharging that electric cars are burdened with now," he said.
  • Automakers will only be able to meet the federal government's 2025 fuel-economy standards by eliminating considerable weight from their vehicles while also focusing on electricity and other alternative forms of propulsion. "The most cost-effective solution is likely to be some combination of these changes and downsizing the vehicles," he said.
  • Traffic congestion may curb auto sales in China, India and other emerging markets. But he sees the economy in China growing faster this year after a slowdown in 2012, which he attributed to its government's efforts to control a real-estate building boom.
  • The popularity of short-term car rentals, such as that offered by Zipcar, could provide a new source of revenue for dealers. Residents of many urban areas, particularly younger people who increasingly elect not to own a car, have fueled rapid growth for Zipcar, which is being acquired by Avis. "Dealers have large inventories of vehicles and are open on weekends," he said. "That might provide them with ancillary income at relatively low cost."


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Ross cautions against carmakers' expanding lineups

AUTOMOTIVE NEWS

Published: January 17, 2013 1:44 pm ET
Updated: January 17, 2013 1:55 pm ET

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