Business is booming at Beau Boeckmann’s Ford (F) showroom in southern California, with buyers snapping up Fusion sedans they compare to Aston Martins. Just don’t ask how the government shutdown might influence sales.
“I don’t know with this government shutdown; now you’ve got me all freaked out,” Boeckmann said in an interview yesterday from his dealership in North Hills, California. “I don’t think it will have an impact on us unless it lingers on and starts affecting people personally.”
On a day when automakers reported resilient September sales -- on a pace for the best year since 2007 -- a shiver ran through the industry as it contemplated the impact a prolonged Washington standoff could have on showroom traffic.
Deliveries slipped 4.2 percent for the first decrease in more than two years, as a quirk in the calendar pushed results of Labor Day promotions into August’s results. The annualized selling rate, adjusted for seasonal factors and the short month, rose to 15.3 million, slower than August’s pace. Executives said the fragile recovery can’t take too much uncertainty.
“Any type of disruption in government operations would adversely affect government spending, business and consumer confidence, and financial markets,” Jenny Lin, a senior economist at Ford Motor Co., told reporters and analysts.
On this, General Motors Co. (GM) and Ford agreed.
“If this thing drags out a couple of weeks, it starts to have more impact on customer sentiment and it starts to have a bigger impact on business,” said Kurt McNeil, GM’s vice president of U.S. sales.
Detroit is right to worry, said Diane Swonk, chief economist at Mesirow Financial in Chicago. These are not like the heady days of irrational exuberance that followed the 21-day shutdown in 1995-96. Consumers are far more skittish today as the economy continues to struggle to get out of first gear.
“It’s going to be a lot harder to woo consumers in as these headlines start to play out, particularly once they start to affect financial markets,” Swonk said in an interview yesterday. “When financial markets get really volatile, people get hesitant to buy big-ticket items.”
Ford and Chrysler Group LLC each beat analysts’ estimates for a down month. Ford sales rose 5.7 percent, while Chrysler, majority owned by Fiat SpA (F), rose 0.7 percent, continuing a streak of sales gains that has reached 42 months. Most other large automakers’ deliveries fell more than analysts predicted, and the light vehicle sales pace was shy of the 15.4 million average of 16 estimates.
Boeckmann said sales in his dealership are up 15 percent over the last two months, though they slowed in September because it had fewer selling days than last year. A $219-a-month lease deal on the C-Max Energi plug-in hybrid drove sales of that model, he said. Nationwide, sales of Ford’s C-Max compact wagon more than doubled last month, while Fusion family car sales soared 62 percent.
Californians, who embraced Toyota Motor Corp. (7203)’s and Honda Motor Co. (7267)’s fuel-efficient cars, are increasingly turning to American models, Boeckmann said. They see Detroit delivering the best sedans in a generation and no longer just peddling gas-guzzling trucks and sport-utility vehicles, he said.
“They used to be seen as the dinosaurs, not fuel-efficient -- old technology, old design,” Boeckmann said. “The reasons why people avoided Ford in the past are the reasons they are coming to Ford now.”
The surging U.S. auto industry has been a bright spot in an otherwise cloudy economy, which makes it critical that Congress and the White House resolve their dispute and end the shutdown quickly, Swonk said.
“This is an industry that has been at the leading edge of the recovery and it is an industry that has been critical in generating the few manufacturing jobs we’ve seen coming back,” said Swonk, who is based in Chicago and whose father worked for GM. “The hard part is that it’s an industry that’s one of the most at risk, along with the housing market, as you start to get into a long, drawn-out battle. When you start talking about big-ticket purchases, uncertainty is your enemy.”
GM’s sales fell 11 percent as it hustled to stock dealerships with redesigned versions of its Chevrolet Silverado and GMC Sierra pickups, which are selling at prices $3,000 higher than a year earlier. GM deliveries to fleet buyers plunged 27 percent as cars such as the Chevrolet Impala and Cruze break away from the automaker’s past reliance on rental-car companies.
“We try to take a bigger view of the quarter and the year,” GM’s McNeil said in a conference call with analysts and reporters yesterday. “We are still very bullish.”
McNeil expressed hope that the government shutdown wouldn’t stall GM’s ambitious plans to roll out its important new pickups and finish the year strong.
“We have some amount of faith that the right things will be done and done quickly to resolve all that,” McNeil said.
The impact will be felt first near the epicenter of the dispute -- Washington, D.C., where thousands of federal workers are furloughed without pay. Frank Trivieri, Volkswagen of America’s vice president of sales, visited VW stores in the Washington area last weekend and found them quieter than normal.
“It’s way too early, but when you look at the population of government workers that could be furloughed, at some point in time it could have an impact,” he said on a conference call yesterday.
GM finds solace in the comparison to the battle over the debt ceiling in August 2011, when consumer sentiment plunged, according to Sue Yingzi Su, the automaker’s North American economist. During that debate, auto sales rose and the annual selling rate remained unchanged from July to August 2011.
“Auto sales demand simply held up pretty well,” Su said in a conference call yesterday. “We think it’s fair to say we should be able to weather the problems of these times.”
Boeckmann said he feels the same as he did about the fiscal cliff the economy was headed for earlier this year, which caused no vertigo on his showroom floor.
“There was a collective yawn from the consumer,” he said. “I don’t think I even heard mention of the fiscal cliff on the sales floor.”
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