Special Coverage

Frankfurt Auto Show

FRANKFURT – Supplier magnate Wilbur Ross proposes a pan-European scrappage program to offset an anticipated vehicle sales slide in 2010.

Speaking at a SupplierBusiness conference staged in conjunction with the Frankfurt auto show here, the billionaire founder and chairman of International Automotive Components Group warns Europe’s sales could decline by more than 1 million units next year, compared with 2009.

But Ross also reminds conference attendees that trade-in programs have had a positive impact this year, particularly in Germany.

“One EU-wide program would be easier to promote and easier for the public to understand,” he says, calling for the formation of a joint lobby comprising auto makers, suppliers, dealers and environmentalists.

The lobby would push for a program that awards rebates to consumers who trade in older vehicles for modern, fuel-efficient models.

Recalling the early-summer fight led by industry stakeholders and key politicians in the U.S., Ross offers hope. “We had success in the U.S. with such an uprising, even though it came in the midst of vast government financing of the General Motors (Corp.) and Chrysler (LLC) bankruptcies,” he says.

Administration costs associated with a comprehensive EU scrappage program could be shared with a formula tied to the number of vehicles sold in each country, says Ross.

A scrappage scheme would be welcome because he anticipates flat sales or sales declines next year in the U.K, Italy, Spain and Germany, where an aggressive rebate program may have triggered a pull-ahead effect.

Germany’s plan, which was linked to some 340,000 new-vehicle sales, was the most aggressive in Europe. But it also could lead to a first-half decline when 2010 deliveries are compared with 2009 totals, Ross warns.

The E5 billion ($7.4 billion) price tag on Germany’s incentive scheme represents more than twice the $2.9 billion expenditure of the U.S. Cars Allowance Rebate System (CARS), also known as “Cash for Clunkers.” Ross derides CARS for arriving late and “sloppily.”

Computer overloads delayed payouts, leaving auto dealers in a lurch, most of whom fronted customers the rebate money to help clinch sales.

The U.S. program ended Aug. 26, but weeks later, some dealers still were out millions of dollars. Nevertheless, Clunkers helped move some 700,000 vehicles off dealer lots.

“Perhaps half (of those sales) would have taken place anyway this year, and one-fourth next year, leaving 175,000 as incremental demand,” Ross says, adding the program’s elimination “should not be a major problem in the U.S.”

Ross predicts the next 10 years “will witness a renaissance,” as the auto industry is transformed by changing demographics. But those demographics have more potential to benefit China and India than the U.S. and Europe.

Combined, the U.S. and Europe are home to about 496 million people of driving age – just two-thirds the size of the same population in India and half the number in China, he says.

In addition, growth rates for the driving-age populations in India and China exceed those of the U.S. and Europe.

emayne@wardsauto.com