Berkshire Hathaway Inc chairman Warren Buffett said the company plans to buy more auto dealerships, regardless of the interest-rate outlook, in part because the price of entry is reasonably predictable.
If US Federal Reserve Chair “Janet Yellen came up and whispered into my ear what she was going to do for the next two years, it wouldn’t make a difference what we’d do,” he said on Tuesday in New York at the 2015 Automotive Forum held by J.D. Power and the National Automobile Dealers Association. “We don’t want to get out of the game based on what we think somebody might do.”
Buffett, who has said auto sales have rebounded faster than he expected, this month completed the purchase of the Van Tuyl Group, the largest closely held US car-dealership group. The billionaire wrote in his annual letter to shareholders that Berkshire plans to build its vehicle-retailing business with more acquisitions.
Consumers in the US bought about 16.5 million cars and light trucks last year, according to researcher Autodata Corp, the most since 2006. Annual auto sales are on track to exceed 16 million for the second year in a row, according to data compiled by Bloomberg.
With a healthy auto industry, dealerships remain an attractive investment with well-understood economics.
“The prices are fairly well established in the industry,” Buffett said. “You’re not talking biotech or something you can dream of this or that. You can look at the operation and see what they’re doing and see what their competition is. You can guess within 5 to 10 percent what the eventual price is going to be when you’re looking at any dealership, whether we make the deal or not.”
Separately, Buffett said in an interview with CNBC on Tuesday that the eurozone could withstand Greece’s departure from the currency union.
“If it turns out the Greeks leave, that may not be a bad thing for the euro,” Buffett said. “If everybody learns that the rules mean something and if they come to general agreement about fiscal policy among members, or something of the sort, that they mean business, that could be a good thing.”
Europe’s most-indebted state is locked in negotiations with eurozone countries and the IMF over the terms of its 240 billion euro (US$257.5 billion) rescue. The standoff, which has left Greece dependent upon European Central Bank loans, risks leading to a default within weeks and its potential exit from the eurozone.
Buffett said that over time, the countries in the eurozone would need to better coordinate their labor laws, fiscal deficits and general management of their economies.
“It can’t continue with people going in dramatically different directions,” Buffett said. “The Germans are not going to fund the Greeks forever.”
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