‘Sad and Depressed’ CEOs See No Light at End of Partisan Impasse
Business leaders, who generally didn’t support President Barack Obama’s policies in the past four years or his re-election bid, weren’t in a more-gracious mood after the results were in. Today’s decline in the U.S. stock markets, the biggest since June, didn’t help.
Andrew Puzder, chief executive officer of Hardee’s burger chain owner CKE Inc., said he was “sad and depressed” after Republican Mitt Romney’s defeat and expects the economy “to stay bad with the possibility of being horrific.” Aetna Inc. (AET) CEO Officer Mark Bertolini said the insurer may freeze hiring or cut jobs if Obama and Republicans don’t avoid next year’s so- called fiscal cliff of tax increases and spending cuts.
Captains of industry called on Obama to temper partisan bickering in Washington, without providing, for now, much of an example. On Twitter, real estate developer and former presidential candidate Donald Trump said the U.S. is headed for “serious and unprecedented trouble.”
“This election is a total sham and travesty,” Trump, who opposed Obama, said in another Twitter post.
The Standard & Poor’s 500 Index, which has gained 64 percent since Obama took office in 2009, lost 1.9 percent to 1,401.33 at 2:04 p.m. in New York today, its lowest level on a closing basis since August.
Obama is staying in the White House as Republicans retained control of the House of Representatives, setting up the potential for political gridlock as the economic recovery sputters. Obama deflected criticism of health-care reform and tax increases by crediting the expanded role of government in recapitalizing the U.S. banking system and rescuing automakers.
Among the most pressing challenges Obama will face is avoiding $607 billion in tax increases and government spending cuts set to take effect in January and reducing the national debt, said Macy’s Inc. CEO Terry Lundgren, who is also the chairman of the National Retail Federation.
“It’s going to depend on how both sides work together and that’s a fundamental that is no different now than it was two months ago, six months ago, four years ago,” David Cote, CEO of Honeywell International Inc., said today in an interview. Cote, who was among more than 80 CEOs supporting the group Campaign to Fix the Debt, declined to say which candidate he supported.
Other executives said they hoped Obama’s re-election may push more Republicans toward compromise on lowering the deficit and reforming U.S. immigration policy.
“From a business point of view, I hope that the Republicans become more flexible and I think they need to be, having lost two elections in a row,” said Kevin Ryan, founder and CEO of New York-based Gilt Groupe Inc., a closely held flash-sale website for designer goods. He said he voted for Obama and donated to his campaign, including co-hosting a fundraiser for the president.
Obama became only the second Democrat since Franklin Roosevelt in 1936 to win a second term, after Bill Clinton was re-elected in 1996. The Democratic president captured 303 Electoral College votes, more than the 270 needed to win the White House and topping Romney’s 206. Obama, 51, held a slim lead over Romney in Florida with 92 percent of votes counted.
Romney, 65, criticized the growth of government and tax increases under Obama even as he softened his conservative tone from early in the campaign.
Health-care costs for restaurant owner CKE may rise from about $12 million to $30 million a year under Obama’s Patient Protection and Affordable Care Act, said CEO Puzder, who donated to Romney and served as an economic adviser.
Carpinteria, California-based CKE will try to use attrition to move jobs from full time to part time to save health-care costs, Puzder said. The administration needs to “try to find a way to make Obamacare affordable for American businesses so it doesn’t petrify people from growing,” he said in an interview.
Landry’s Inc., the Houston-based owner of the Rainforest Cafe and McCormick & Schmick’s restaurant chains, also will hire more part-timers, CEO Tilman Fertitta said in an interview.
“You’re going to have lots of employees work 30 hours a week,” with some working two or three jobs because they can’t find full-time work, Fertitta said.
Other companies stand to benefit from health-care reform. Trevor Fetter, CEO of Tenet Healthcare Corp. (THC) in Dallas, said the new policies will help drive earnings at the third-largest hospital company over the next few years.
“All of our hospitals are in markets that will see an increase in covered lives, and in virtually all our markets, that growth exceeds the rate for the country as a whole,” Fetter said today on an earnings call.
The close popular vote and tight races in swing states such as Florida don’t give Obama and the Democrats enough political capital to push through a solution on the debt and tax reform without Republican support, according to Cote, of Morris Township, New Jersey-based Honeywell.
“You won, but you didn’t win by enough to just do what you want,” Cote said. “At the end of the day there’s no kidding around that they need to work together as Americans and develop an American solution to an American problem.”
David Siegel, CEO of Orlando, Florida-based Westgate Resorts LLC, the largest closely held operator of time-share properties, predicted “four years of petty squabbling.” He said he voted for Romney and contributed financially to his campaign.
One of Obama’s tasks will be to increase employment. The jobless rate stood at 7.9 percent last month from a peak of 10 percent in October 2009. The September unemployment rate unexpectedly fell to 7.8 percent, giving Obama’s re-election campaign a boost a month before the election.
Jack Welch, the former General Electric Co. CEO and a Romney backer, congratulated Obama and his re-election team on “their terrific victory.” A month ago, Welch suggested on Twitter that the president’s administration had manipulated jobs data for political advantage after the September unemployment rate unexpectedly fell to the lowest since the president took office in January 2009.
Concerns about the economy and the outcome of the presidential election have made U.S. companies reluctant to expand. A Business Roundtable third-quarter survey in September showed 34 percent of U.S. CEOs anticipate they will have fewer domestic employees in the next six months. That’s up from 20 percent in the previous second-quarter survey.
“One of the major contributors to slow economic growth is the very large sense of uncertainty that most businesses have around what public policy is going to be,” Clay Jones, CEO of aerospace supplier Rockwell Collins Inc. (COL), said in a telephone interview today.
Jones is cutting about 6 percent of his company’s workforce, some 1,250 jobs, in part to prepare for a potential reduction in defense spending. Defense accounted for about 55 percent of Rockwell Collins’s revenue in the fiscal year ended in September.
The U.S. economy expanded at a 2 percent pace in the third quarter, to an inflation-adjusted $13.6 trillion, after climbing 1.3 percent in the prior quarter. Economists project GDP will grow by 2 percent next year, according to the median of 89 estimates in a Bloomberg survey taken Oct. 5-10.
One gauge of U.S. corporate credit risk based on credit- default swaps today increased the most in six weeks, reflecting concern about whether legislators will deal with the fiscal cliff. A failure to do so may lead to a downgrade of U.S. debt, said Klaus Kleinfeld, CEO of Alcoa Inc. (AA), the largest U.S. aluminum producer.
“Confidence is the air that people invest on, that they build on,” Kleinfeld, who didn’t support a candidate, said today in an interview. Obama’s “top priority has to be the avoidance of the fiscal cliff and leading to a balanced budget at the same time.”
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