Post-shutdown: What will it mean for the auto industry?

Post-shutdown: What will it mean for the auto industry?

Does the last-minute deal to end the shutdown and avoid a government default mean the economy will continue on its gradual recovery and auto sales return to their robust pace? At a minimum, this months sales will likely be affected. The situation is, of course, magnified in the Washington area, with all the federal workers and federal contractor workers.

Federal workers who cut back on their spending while they were furloughed may have simply postponed a planned car purchase or maintenance. But federal government contractors wont receive pay for the time they missed.

Hyundai CEO John Krafcik predicted the shutdown will cut 10 percent of this years auto sales. NADA Chairman David Westcott, speaking in Detroit the day an agreement was finally reached, agreed with that figure. Turning lemons into lemonade, Joe Hinrichs, Ford Motor Co.s president of the Americas, went so far as to tell that a small cutback in demand might not be bad because capacity constraints had become a potential threat.

The work of some government agencies was missed. National Transportation Safety Board Chairman Deborah Hersman said at a Senate hearing 10 days into the shutdown that her agency had suspended work on thousands of safety investigations. All but 22 of the NTSBs 405 employees were furloughed.

Congress voted to fund the government, but only until January 15; and to lift the debt ceiling, but until February 7. So are Americans poised to go through this all over again then? Has Congress learned its lesson? The polling shows the overwhelming majority of Americans hope the answers are no and yes, but who knows? A bipartisan group in Congress has already started work on a budget deal that both sides can live with. Grand bargain? Unlikely. It seems the main goals will be finding ways to cut spending (Republicans remain adamant about not raising taxes) and to change the arbitrary effects of sequestration. Tax reform is a possibility, but it doesnt look likely in the near term.

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