October Car Sales Stall on U.S. Shutdown, Hyundai Says

A prolonged U.S. government shutdown is damaging consumer confidence and may trim October new-vehicle sales by as much as 10 percent, said John Krafcik, chief executive officer of Hyundai Motor Co. (005380)’s U.S. sales unit.

The standoff in Washington that began Oct. 1, leaving some government agencies closed and federal workers furloughed, is generating “anxiety” for many people, Krafcik said in an interview with Sara Eisen, an anchor of Bloomberg Surveillance.

“It’s that anxiety that keeps customers, potential buyers, on the sidelines when making a big purchase like an automobile,” he said. “We’ll probably see the industry off five to 10 percent this month, compared to where it was in September. I think a lot of it has to do with this shutdown discussion.”

Auto sales were a consistent bright spot for the U.S. economy this year until September, when fewer sales days in the month than usual led to 2013’s first decline in deliveries. The year’s final quarter, when carmakers sell off previous model year vehicles and transition to newer products, tends to be a strong sales period for the industry.

September 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. Automakers, including General Motors Co. (GM) and Ford Motor Co. (F), said early this month that the government shutdown posed a threat to an already slow economic recovery.

“Industrywide, we’re definitely seeing a slowdown in October,” Krafcik said.

Budget Impasse

U.S. Senate Democratic and Republican leaders were working on the details of an agreement late yesterday to end the partial government shutdown and raise the debt ceiling before Oct. 17. The House of Representatives made its own proposal today, which Senate Majority Leader Harry Reid rejected.

Hyundai at the start of the month announced a program to allow federal workers affected by the shutdown to defer loan and lease payments to the Seoul-based automaker.

“We have already had requests from over a thousand people to have their payments deferred,” Krafcik told Bloomberg Television. “That’s a much stronger uptake than we thought. It makes us happy. It means we’re making a difference, but it does give an indication of just how deep and serious the issues are.” Krafcik also mentioned the requests from federal workers in a post on Twitter.

Toyota Loans

Toyota Financial Services, Toyota Motor Corp. (7203)’s U.S. automotive lending unit, late yesterday said it too would provide “relief” on loan and lease payments for federal employees for as long as three months.

“The government shutdown has placed an unanticipated financial strain on many individuals and families,” Al Smith, group vice president of Toyota Financial Services, said in a statement. Both Toyota Financial Services and Lexus Financial Services “are pleased to be able to provide some flexibility to our customers affected by this situation,” he said.

Toyota hasn’t observed changes in consumer confidence so far and the company’s production and sales operations haven’t been affected by the shutdown, said Carly Schaffner, a spokeswoman for the company’s U.S. unit. Processing of vehicles built in Japan through U.S. ports also hasn’t been delayed, she said.

Hyundai Motor’s U.S. sales unit is in Costa Mesa, California. The company rose 0.6 percent to 263,500 won at the close in Seoul. Hyundai has gained 21 percent this year, compared with a 2.2 percent increase for Korea’s benchmark Kospi index.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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