Longer U.S. government shutdown could lead to slow auto sales image

Unease in the automobile industry about the impact that a prolonged government shutdown could have on car and truck sales is starting to grow.

So far, the effect has been minimal — perhaps a modest decline in sales in the greater Washington, D.C., region that analysts say will quickly be made up once Uncle Sam resumes signing paychecks to his workers.

But if the Obama administration and lawmakers are unable to reach a compromise that gets the government back to work and avoids a default on the nation’s debt, the impact on the auto industry could soon be far more serious.

“The longer it drags on, the more serious it becomes. It potentially has the ability to derail the momentum the industry has built over the past couple of years,” said Jeff Schuster, vice president of vehicle forecasting at LMC Automotive. “It goes well beyond the furloughed federal employees. It’s all about consumer confidence.”

“None of this is good for the automotive industry — especially if it extends past that magic four- or five-week time period and begins to really affect consumer confidence,” added Michael Robinet, managing director of IHS Automotive Consulting. “If you start to go past three, four or five weeks, you start to impact personal budgets.”

“We are optimistic that our government leaders will come together in support of a solution that funds the U.S. government and avoids significant disruptions to our still-fragile U.S. economy,” Ford Motor Co. said in a statement Wednesday. “Clearly, it is too soon to say whether the U.S. government shutdown will affect U.S. sales going forward.”

“The current political stalemate comes at a critical time when the U.S. economy, and auto sales in particular, were gaining strength,” GM spokesman Greg Martin also said in a statement yesterday. “Continued inaction could put this progress at risk by eroding consumer confidence and creating market uncertainty.”

The shutdown has entered its tenth day, but so far consumer confidence has proven remarkably resilient. But Schuster says it will get shakier with each passing week. If the stalemate continues into November, he believes many consumers will decide to put off major purchases.