Automakers Fear Effects of ‘Fiscal Cliff’
Could the impending “fiscal cliff” in the U.S. potentially harm the still-recovering auto industry? Detroit automakers worry it will.
The fiscal cliff refers to billions of dollars’ worth of automatic tax increases and spending cuts slated to go into effect Jan. 1, 2013. If the Obama administration and Congress fail to devise a plan to prevent the looming “cliff,” government analysts fear another recession could be on the horizon.
“It is vitally important for the economy that we work this out,” Ford Motor Co. Executive Chairman Bill Ford Jr. told Detroit News Monday. “We (Ford) are not isolated from what happens in the rest of the country.”
Sergio Marchionne, CEO of Fiat-Chrysler, had a similar view.
“I’ve been following this with much anxiety,” he said last week. “I’m relying on the wisdom of the political leadership to avoid this — for all of us.”
Analysts expect that a compromise will be reached to avoid many of the tax increases and cuts, though Edmunds.com’s Chief Economist Lacey Plache said that government inaction would “certainly impact car sales, but the likelihood that all these changes would occur is not high.”
In fact, Plache expects there to be no more than a 3% direct risk on sales, thanks in part to consumers being at a point where they can no longer put off buying a new vehicle, no matter their tax rate. “We still have millions of units of pent-up demand,” she said. “We’re [also] expecting there to be a surge in lease returns in 2013.”
Edmunds still anticipates 15 million units of new car sales in 2013.
