'Auto industry to worsen'

Agence France Presse, Kuala Lumpur

Asia's auto industry will experience a roller-coaster ride next year but a recovery can be expected from 2003, according to industry experts at a regional conference here.

"There was general consensus that 2002 is going to be a roller-coaster ride for Asia but the good news is that in 2003, the industry is going to have a healthy recovery," according to a statement Wednesday.

The statement was issued at the conclusion Tuesday of a two- day conference on Asia's automotive industry, attended by more than 120 top executives from across the region.

"Asia's automotive industry is going to get worse before it gets better again but the long-term prospects make the region the most attractive in the world," the statement said.

Graeme Maxton, an economist with London-based consultancy Autopolis, was quoted as saying the main problem currently facing global economies was over-capacity.

"It is over-investment and the build-up of debt that has led to over-capacity in a hundred different industries. Not until all the excess capacities are cut, will the economies get better," he said.

Although a recovery would begin 2003, Maxton predicted that car sales would only return to levels reached last year in 2005.

He said Asia's "baby boomers" in the auto sector would experience the strongest growth over the next five years such as Tata in India, Tianjin and Chang'an in China, Iran's Khodro and Malaysia's Proton.

Gerald Kania, Ford Motor Co.'s operations president for Southeast Asia, predicted 2003 would be the year of growth once the ASEAN Free Trade Area (AFTA) was implemented.

Under AFTA, tariffs on auto products will fall to between zero and five percent by 2003 but Malaysia has delayed cutting tariffs until 2005.

Rudolf Schlais, General Motors' Asia-Pacific president, said the company expected eight countries to account for 67 percent of its global growth over the next decade, of which four are in Asia.

The company's strategy in Asia was to form partnerships, rather than taking up controlling stakes in companies, he said. "We enjoy the same benefits of a full merger but we avoid many of the pitfalls of combining companies and cultures."

The conference agreed China was "the sleeping dragon" in the long-term because significant changes were expected in its auto sector after its entry into the World Trade Organization later this year.

"The conclusion was one of cautious optimism," the statement said.

"While markets in the region were likely to find the going harder short-term, Asia offered more growth and fewer risks than any other region in the world to carmakers."