Ford: Higher Payroll Tax May Hurt Auto Sales but Outlook Is Good
DETROIT (TheStreet) -- U.S. automakers are optimistic about auto sales in 2013 but Ford (F) has concerns about the impact of the resumption of the payroll tax.
On the GM (GM) sales call Thursday, Kurt McNeil, vice president of U.S. sales operations, forecast 2013 light-vehicle sales of 15 million to 15.5 million units, which would represent the fifth consecutive year of growth in U.S. auto sales.
"We are very optimistic about our competitive position and the strength of the industry as we move into 2013," McNeil said. "We are especially pleased that politicians on both sides of the aisle in Washington were able to reach a compromise."
On Wednesday, Congress approved a compromise bill that avoided the impact of self-imposed "fiscal cliff" spending cuts legislation, raised taxes on the wealthiest Americans and also re-instated a 2% payroll tax that goes to Social Security. The payroll tax was reduced to 4.2% from 6.2% in 2010 in a temporary effort to boost consumer spending.
On the Ford sales call, economist Ellen Hughes-Cromwell forecast U.S. vehicle sales of 15 million to 16 million, including about 300 million medium and heavy vehicles. She said increased taxes for Americans making more than $400,000 for individuals and $450,000 for married couples won't affect the auto industry much because "only 2% of new vehicle buyers have income in that upper income tax bracket."
However, Hughes-Cromwell said the payroll tax increase amounts to about $1,000 to $1,500 per person and "will crimp consumer spending in the months ahead (largely because) some consumers will purchase vehicles that have pricing within their budget."
That is "something we need to really gauge in terms of how consumers are going to substitute and economize as they look at their take home pay," she said, even though, on balance, "the housing recovery and a little more certainty on our tax bill is a favorable development."
GM economist Mustafa Mohatarem focused on the positive outlook, saying "we're pretty confident about the underlying path of both the economic recovery and auto sales ...we're expecting a steady continuation of the momentum we've seen."
Both GM and Ford cited strong pickup truck sales as an indication of the housing recovery. Sales of the Ford F-150 pickup truck reached 68,787, the most since August 2007. At GM, Silverado sold 50,699 units, while the GMC Sierra sold 18,710 units, for a total of 69,409 units.