DETROIT -- The biggest drag on 2013 U.S. auto sales is the congressional impasse.
Auto executives, forecasters, economists and analysts all agree. I've rarely seen such unanimity on naming a single problem for the year ahead.
But let's be honest about the "congressional impasse" they all politely mention. It's a code phrase. When auto-biz folks use it, they aren't referring to the very real differences between political parties in how we as a country should spend our tax dollars or reduce our mounting public debt. That's a long-term issue, but not an immediate threat to auto sales.
No, they're talking about the Republican Party's decision to use the debt ceiling as its primary bargaining tool. Raising the debt limit is technically not about whether to spend money, but whether Uncle Sam pays the bill for money already spent: raise the ceiling or default.
In negotiating terms, it's the suicide bomber option: meet my demands or kaboom. Worse, it only works when the other side thinks you're crazy enough to do it.
And that's what keeps the auto number crunchers up at night.
The sequestration of hundreds of billions in federal spending? One of several minor issues, at least this year. But a federal government default? The industry sees that as a huge blow to auto sales immediately, and more pain later as interest rates spike.
And Fitch agrees. The London-based ratings agency warned Tuesday that if Congress even dithers on raising the debt ceiling it could trigger a downgrade, likely raising U.S. interest rates and shaking the global financial system. "Failure to raise the debt ceiling in a timely manner will prompt a formal review of the U.S. sovereign ratings," Fitch said in a statement a day after President Obama publicly demanded that Republicans quickly raise the debt ceiling.
Don't get me wrong. The debt ceiling has been raised dozens of times in the past century and it's always had partisan bickering, especially by the minority party of the day. Democrats do brinksmanship too.
But everybody remembers the only other time default was a real possibility, in August 2011, when it went down to the wire. And two ratings agencies cut the U.S. credit rating for the first time, citing doubts not about the country's ability to pay but its willingness.
"We saw how that worked out," says Lacey Plache, chief economist for Edmunds.com. "If it happens again, it could get a harsher response from the ratings agencies," significantly raising the interest rates the government, and ultimately car buyers, would pay on new debt.
How many car sales are at risk? About 200,000 units, says Rebecca Lindland of IHS Automotive. Mazda North America CEO Jim O'Sullivan says 250,000. TrueCar.com analyst Jesse Toprak says 200,000 to 300,000.
A quarter million might be a small chunk of 15 million, but among 20,000 dealers, that's an average dozen units this year.
Toprak thinks it probably will be resolved by the end of March. Lindland, Plache and others are dubious the wrangling will stop any time this year.
But Paul Taylor, chief economist of the National Automobile Dealers Association, takes the long view. In the short term, however long Congress remains deadlocked on cutting spending, "that assures there will be no draconian spending cuts," he says. "While the talking goes on, the spending goes on."
But if that continues too long and the federal deficit keeps growing, it will over-stimulate the economy until price inflation forces the Federal Reserve to raise interest rates. And that would directly harm U.S. auto sales, which has benefitted from historically low loan rates. The continued heated political argument remains a drag on consumer confidence, another car sales downer.
And indirectly, the continued uncertainty about tax rates and structures, jobs and the economy keeps business from hiring or investing, further depressing U.S. employment, another car sales no-no.
Looking through auto dealers' eyes, Taylor sees an ideal trajectory that keeps car sales bubbling along: long-term, a substantial and permanent reduction in federal deficits, but not so quickly it creates a downturn. "Congress needs to perform a real balancing act," he says. Can this Congress do that? Taylor shrugs.
Mazda's O'Sullivan says some clarity from Washington might add 250,000 auto sales.
"If we can get a bit of [a roadmap] for the next two to three years for what businesses can anticipate relative to taxation and the regulatory environment, I think the equity markets will react very positively," he says. "That will help support consumer confidence. I think business will see a better green light to go hire."