Investor Wilbur Ross predicts that a 750,000-unit drop this year in North American vehicle sales will spur a consolidation of automotive suppliers.
Ross told an audience at the Automotive News World Congress in Detroit that he expects one or more of today's ``walking wounded'' suppliers to be liquidated this year.
His New York-based private equity group, W.L. Ross & Co. LLC, has a war chest of about $5 billion to buy attractive parts-making assets, said Ross, the owner of International Automotive Components Group in Dearborn, Mich.
``For all practical purposes, we really have no size limitations,'' Ross said Jan. 22.
IAC, created in 2005, has acquired interiors suppliers with global sales approaching $6 billion. It has done so, Ross said, without taking on any debt.
That has allowed the company to invest in research and development. Ross said IAC is working to:
* Replace parts made from petroleum with parts made from natural fibers.
* Develop more composite parts for underhood uses.
* Develop plastic windows to replace heavier glass.
IAC bought the interiors assets of Lear Corp. and combined them with select assets of defunct Collins & Aikman Corp. Ross also has purchased niche players in Brazil and Japan. IAC now has 20,000 employees in 17 countries.
Ross said his private equity investors have a long investment horizon, unlike many hedge funds. He said 2008 should offer more acquisition opportunities as falling sales speed the decline of the North American supplier base.
A 750,000-unit drop in 2008 would put sales at about 15.3 million units. That represents one of the most pessimistic predictions by an industry executive. Most experts predict sales of 15.6 million to 16 million.
Irresponsible consumer borrowing facilitated by lax credit requirements has left consumers tapped out and unable to sustain car sales at historically high levels, according to Ross.
Suppliers heavily reliant on North American car companies could succumb or look for buyers to meet their capital requirements, he said.
Ross said he is bullish on the car business. He said that for properly positioned suppliers, vehicle sales outside North America and Western Europe will more than compensate for any drop in developed markets.