Billionaire vulture investor Wilbur Ross, chairman of W.L. Ross & Co., is scouring the beat-up auto industry for investing opportunities. And there's certainly no shortage of prey: the credit rating declines of both General Motors and Ford Motor Co. to below investment grade have dragged down an already beleaguered industry, with the latest example being auto-supplier Collins & Aikman's recent file for bankruptcy protection.
Ross said the auto manufacturing and supplying businesses are attractive because they offer enough varied opportunities, which he likened to the once powerful steel industry. "The auto and auto parts sector is fragmented and a big sector. Its problems are similar to the context of [the steel industry's]," he said, speaking at Strategic Research Institute's Eighth Annual East Distressed Debt Investing Forum in New York last week. And Ross knows a thing or two about the steel business, having overhauled the troubled industry through his formation of consolidated company International Steel Group.
That being said, just because a sector is troubled and valuations are low does not guarantee a bite from Ross, as he noted he has so far passed on the airline industry.
Ross did not discuss any specific investment plans or targets in the auto industry. His most recent venture has been in the textile industry through his fabric conglomerate International Textile Group, which he formed from merging Burlington Industries and Cone Mills last year. He intends to make ITG the first global textile to operate in every marketplace and is continuing to pursue expansion opportunities in Asia. While he has looked at European textile makers, Ross noted European labor laws make it difficult to shrink a company's work force which has made investing unappealing.
Ross noted he will stay away from retailers as he finds the business a difficult one, with industries dependent on tort legislation and companies with a history of fraud. "I don't like to go into things with moral turpitude. If the top is corrupt, it's hard to figure out [the rest]," he said. Ross added he will continue to look at the airline sector but hasn't yet found an appealing opportunity.