Washington Budget Fight Hurts Auto Sales


Auto sales tailed off last week, and some dealers and experts are pointing the finger at bickering politicians in Washington.

Data collected by J.D. Power and Associates show that sales fell in the second week of October, as the partial shutdown of the government and the debate over the nation’s borrowing dragged on. During the first week, sales ran at an annual rate of 15.6 million. But the rate fell to 15.3 million in the week ended Oct. 11.

Analysts such as Jeff Schuster expected sales to recover in October after a weak September, bouncing back to the robust pace seen in August. But J.D. Power data collected from auto dealers nationwide show otherwise, and there’s no explanation other than the government gridlock, said Schuster, senior vice president of forecasting for LMC Automotive, an industry consulting firm that works closely with J.D. Power.

“It’s been enough of a hit to consumer confidence that it’s affected sales,” said Schuster, who would not give specific numbers.

On Wednesday, Congress raced to pass legislation to avoid a national default and end the 16-day partial government shutdown after Senate leaders forged a deal. Treasury Secretary Jacob Lew has warned that Thursday is the day that Treasury would reach the current $16.7 trillion debt limit, and could no longer borrow to meet its obligations.

J.D. Power numbers are not normally released publicly, but they were obtained Wednesday by The Associated Press from one of the company’s clients.

Auto sales have been running at an annual rate of 15.5 million in 2013, up from last year’s 14.4 million, putting them back at pre-recession levels. September sales slipped, because strong sales from the Labor Day weekend were counted in August this year. Auto sales have been a bright spot in the U.S. economy for the past four years, gradually rising from a 30-year low of 10.4 million in 2009.

Analysts say that some customers have backed out of the auto market, unwilling to make a big-ticket commitment given uncertainty in Washington. Many analysts predicted rising interest rates or even a recession should the government fail to raise the debt ceiling and default on its obligations.

David Westcott, chairman of the National Automobile Dealers Association and a Buick-GMC dealer in Burlington, N.C., said he senses that sales are down slightly nationwide when compared with September.

“Consumer confidence has dipped a little bit,” he said after speaking Wednesday to the Automotive Press Association in Detroit. Customer traffic and sales are off a little at his dealership compared with September, he said.

Hyundai’s North American sales and marketing CEO John Krafcik said Tuesday that he expects October sales as a whole to be off 10 percent from September levels, largely laying the blame with Washington.

Schuster said if the budget agreement gets passed, it’s possible sales could bounce back in the second half of this month. But he’s still predicting sales at a rate of 15.2 million or 15.3 million for the full month.

Senate leaders announced a last-minute agreement Wednesday to avert a threatened Treasury default and reopen the government. Congress raced to pass the measure by day’s end. Officials said the proposal called for the Treasury to have authority to continue borrowing through Feb. 7, and the government would reopen through Jan. 15 – which would set up another showdown in Congress early next year.

Some dealers said the brinksmanship in Washington did not impact sales. Richard Bazzy, owner of two Ford Motor Co. franchises in Pittsburgh’s northern suburbs, said his October sales are about 35 percent above last year’s numbers.

“I’m really not feeling it,” he said. “I understand it will be solved. It’s just a matter of when and how. That’s the attitude of the American public.”

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