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| Auto industry warns Washington: fiscal uncertainty threatens recovery | Auto industry warns Washington: fiscal uncertainty threatens recovery |
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| As US carmakers gather in Detroit for their annual auto show, Ford's top economist has warned that Washington's failure to tackle its fiscal crisis and Europe's ongoing financial woes still threaten to derail the industry's recovery. | As US carmakers gather in Detroit for their annual auto show, Ford's top economist has warned that Washington's failure to tackle its fiscal crisis and Europe's ongoing financial woes still threaten to derail the industry's recovery. |
| Chief economist Ellen Hughes-Cromwick said there were many hopeful signs for the US economy and the car industry, including a recovery in the housing market and once hard-pressed millennials now benefiting from better economic conditions. | Chief economist Ellen Hughes-Cromwick said there were many hopeful signs for the US economy and the car industry, including a recovery in the housing market and once hard-pressed millennials now benefiting from better economic conditions. |
| Addressing the Society of Automotive Analysts, Hughes-Cromwick said the agreement over the fiscal cliff left many questions unanswered, especially about how the US would pay for its spiralling medical costs. "We are all part of the fiscal debate," she said. "Today we do not have fiscal sustainability. If we do not fix this and pull things together, it will generate a very weak period of economic growth. You think 2% economic growth is weak? That's nothing," she warned. | Addressing the Society of Automotive Analysts, Hughes-Cromwick said the agreement over the fiscal cliff left many questions unanswered, especially about how the US would pay for its spiralling medical costs. "We are all part of the fiscal debate," she said. "Today we do not have fiscal sustainability. If we do not fix this and pull things together, it will generate a very weak period of economic growth. You think 2% economic growth is weak? That's nothing," she warned. |
| President Barack Obama managed to broker a deal over the so-called fiscal cliff budget crisis just before New Year, but Obama faces another challenge in February as Republicans threaten to clash with Democrats once more over the country's borrowing limit. | President Barack Obama managed to broker a deal over the so-called fiscal cliff budget crisis just before New Year, but Obama faces another challenge in February as Republicans threaten to clash with Democrats once more over the country's borrowing limit. |
| Hughes-Cromwick warned, too, that the situation in Europe was likely to be a drag on the industry for years to come. All the major car companies have been losing cash in Europe as sales have collapsed, and sales in Europe are in their sixth year of decline. "In Italy we haven't seen sales at these levels in our proprietary database," Hughes-Cromwick told the meeting. | Hughes-Cromwick warned, too, that the situation in Europe was likely to be a drag on the industry for years to come. All the major car companies have been losing cash in Europe as sales have collapsed, and sales in Europe are in their sixth year of decline. "In Italy we haven't seen sales at these levels in our proprietary database," Hughes-Cromwick told the meeting. |
| Jeff Schuster, executive director of LMC Automotive, an industry forecaster, told the meeting that its European car sales were unlikely to return to pre-recession levels before 2019 – a decade after the economic nadir. | |
| Hughes-Cromwick's warning comes as Detroit appears to be firmly on the road to recovery. The auto industry is expected to sell 15-16m units in the US this year, the first time it has reached that level since 2007, and up from a low of 10.4m units in 2009. | |
| Luxury cars and larger pickups are attracting all the attention at this year's North American Auto Show, in a sign of returning confidence. "This is the most upbeat analysts' meeting here I've been to in year," said Michelle Krebs, senior analyst at Edmunds.com. | Luxury cars and larger pickups are attracting all the attention at this year's North American Auto Show, in a sign of returning confidence. "This is the most upbeat analysts' meeting here I've been to in year," said Michelle Krebs, senior analyst at Edmunds.com. |
| She said that clear signs of recovery in the housing market were likely to build sales for larger pickup trucks, where the big three US automakers make most of their profits. Ford is unveiling the latest version of its best-selling F-150 truck at the show, and its rivals, too, have big trucks on offer. | She said that clear signs of recovery in the housing market were likely to build sales for larger pickup trucks, where the big three US automakers make most of their profits. Ford is unveiling the latest version of its best-selling F-150 truck at the show, and its rivals, too, have big trucks on offer. |
| But Krebs echoed Hughes-Cromwick's concerns about Europe and Washington. "Everyone thinks that Europe is going to get worse before it gets better and then the fear of contagion is still there. How badly will it hit us over here? | But Krebs echoed Hughes-Cromwick's concerns about Europe and Washington. "Everyone thinks that Europe is going to get worse before it gets better and then the fear of contagion is still there. How badly will it hit us over here? |
| "But the bigger worry is still Washington. If we see another collapse in talks that could hit consumer confidence, sales and the economy. There's so much pent-up demand out there, cars are so old now, but confidence is key." | "But the bigger worry is still Washington. If we see another collapse in talks that could hit consumer confidence, sales and the economy. There's so much pent-up demand out there, cars are so old now, but confidence is key." |