Dec. sales teeter on fiscal cliff
Dealers fret Wash. gridlock could keep shoppers home
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Industrywide, the last 10 days before New Year's Eve are usually some of the best for car sales.
But dealers are bracing for the possibility that a protracted fight in Washington over tax increases and spending cuts could keep some consumers out of showrooms this holiday season.
AutoNation Inc., the nation's No. 1 dealership group, will immediately cut orders to manufacturers and could trim its work force through attrition if automatic tax increases and spending cuts occur on Jan. 1, an AutoNation spokesman said.
Before that, the gridlock in Washington could keep some customers out of showrooms.
"From Christmas to New Year's it feels like Christmas every day for me," AutoNation CEO Mike Jackson said on CNBC last week. "If the country is sitting there transfixed looking at us teetering on the fiscal cliff, that could be very disruptive to those big days for the auto industry."
That would cut against a recent recovery in car sales. AutoNation sold 20,958 units in October, up from 18,530 during the same month last year.
For now, the dealership group is working on the assumption that Congress will reach a deal.
"We have continued to stock up. We have not cut back," the spokesman said.
The same is true at RLJ-McLarty-Landers Automotive Holdings in Little Rock, Ark., Senior Vice President Franklin McLarty said. He said the dysfunction in Washington is "looming large" this holiday season, whereas the effect of last summer's debt ceiling debate was murkier.
That event's impact "varied somewhat from market to market," McLarty said. "In the heartland markets where we tend to operate, people may have been a bit more insulated than in some of the more financially driven markets, like New York."
Talks are already taking place behind closed doors. President Obama held a meeting at the White House last week with top executives, including Alan Mulally, CEO of Ford Motor Co., who called for a deal between Democrats and Republicans that "promotes jobs and economic growth now," a Ford spokeswoman said.
Truecar.com analyst Jesse Toprak said he does not expect the situation in Washington to overcome the expected gains in car sales next year.
Truecar has forecast sales of 15.5 million units for 2013, up from 14.4 million in 2012.
"Of any economic measure that we look at, the stock market has the strongest correlation by far," Toprak said. "That's regardless of what happens with all these tax talks -- forget all that. If the stock market continues to do well, we're going to sell more cars."
You can reach Gabe Nelson at gnelson@crain.com.
