Long Government Shutdown Could Devastate Auto Industry, Too

“This doesn’t impact me . . . mentally. I’m not afraid of a couple of weeks of government being shut down,” Sean Hannity, the multimillionaire media personality, said with practiced obtuseness from his reptilian perch this week. His comrades on the other side of the political DMZ were just as inane. Whether the federal government should be smaller is a political topic worthy of debate—but for the love of St. Stickius, the patron saint of manual transmissions, don’t have that debate in the comments section below. However, whether there’s any consequence from furloughing 800,000 federal workers—including 68 percent of the Centers for Disease Control—is an empirical question. In other words, regardless of your celebration or mourning the fact that the federal government is shut down indefinitely, it is shut down.

This does, of course, relate to the auto industry. After the stock and bond markets, car sales and manufacturing are probably the strongest, earliest indicators of America’s economic health. Here’s what happens to the auto industry if Washington’s temper tantrum continues more than a week or two.

No Money, No Buy

For now, the spending habits of most of those 800,000 will remain unchanged. Those who are the most screwed were probably not in the market for new cars anyway. But after about two weeks of furlough, when people start thinking they may not have a paycheck for the long term, their spending will fall off a cliff. That has the usual ripple effects for the businesses these government workers frequent. The owner of a coffee shop across the street from a federal building is probably not going to think that now is the time to buy a new Ford Transit delivery van.

No New EPA, NHTSA Approvals, Recalls

Any time a car company wants to begin sales of a new vehicle, it needs approval from a host of federal agencies. Automakers already pay to have private companies test their cars’ fuel efficiency, crash safety, and emissions, but all of the results have to be signed off on by the appropriate government office. The people who sign these approvals are, for the most part, on unpaid vacation right now.

• Comparison Test: 2013 Ford Fusion Energi Titanium vs. 2014 Honda Accord Plug-In Hybrid
• Instrumented Test: 2014 Jeep Grand Cherokee SRT
• Comparison Test: 2014 Chevy Cruze 2.0TD vs. 2013 Volkswagen Jetta TDI

Government Costco

Any guesses on who’s the single largest purchaser of new vehicles in the country? The federal government. Government procurement contracts, like those for bulk purchases of vehicles from not just GM, Ford, and Chrysler, but Toyota too, are in flux. Depending on the agency involved, some purchases will still happen. But an untold number are suspended for the time being. No new contracts will be entered into so long as the shutdown continues.

There are bigger, better reasons we’d like to see Congress resolve this shutdown than just auto sales. But as a harbinger of economic strength, the industry is important. And besides, without anyone to certify it, how will the new Mustang go on sale?

Source: CarAndDriver