Tesla stocks tumble after fire – how will the Shutdown affect auto sales?

John Batchelor, host of the John Batchelor radio show, talked to Lou Ann Hammond, CEO, www.drivingthenation.com, about Tesla stocks tumbling after a fire and how will the Shutdown affect auto sales?

Tesla stocks tumble after fire

First, let me say that I hope everyone involved in the accident in Seattle, WA is okay. The operative word there is accident. An accident occurred and a car caught on fire. In 2007 over 250,000 gasoline vehicles caught on fire. In 2010, 4,000 cars a week caught on fire.

Were so comfortable with the internal combustion engine that it doesnt bother us to put 20-30 gallons of gasoline and a lead acid battery, with lots of fuel lines and wires connected to an engine, in a garage that is below or beside the house our loved ones sleep in at night.

I am more concerned with the investigations and lawsuit’s that Tesla gets into needlessly than an accident that occurred. I am not concerned with a short-term drop in the price of Tesla’s stock, I am concerned with their market valuation and the ability to be a long-term on-going concern.

How will the Shutdown affect auto sales?

How would you like to be told by your boss that you were a non-essential part of your company and that you have been paid all along by discretionary funds? 800,000 federal workers have been listed as non-essential and have been sent home without pay while Congress plays pattycake. When Congress does decide on a budget those federal workers will come back to work and will get, ostensibly, backpay, all the while Congress has been getting paid and has better health care than the Affordable care act.

I’ve asked manufacturers if they think there will be an affect on the auto industry. While the manufacturers remain positive, and bullish, the answer is the same, “It depends on how long the shutdown goes on. If it goes on too long people may defer purchasing a new car because of consumer confidence.”

Consumer confidence is the key. In the month of September auto sales fell 4 percent compared to September 2012, to about 1.1 million light vehicles sold. Some of that can be chalked off to the Labor Day weekend being in August instead of September, but to a consumer that doesn’t know this, they may think it was due to the looming shutdown. Truck sales have long been a way to measure housing starts and If you look at truck sales in September, 2013 you will see that the economy is slowly gaining ground. Ford’s F-Series (10%) and Ram’s pickups (8%) both increased in sales in September.

There have been shutdowns before, but if Congress doe not settle their battle before October 17th there will be a default and what is an embarrassment, and harassment, right now will become serious if we hit the debt ceiling. The closer we get to October 17th without an extension to the continuing resolution to fund the discretionary portions of the federal government the more concerned the 800,000 federal workers will become because that is when your boss tells you that the company no longer has the funds to employ you.

If Congress does not pass an extension the Treasury will lack the legal authority to borrow the money to close the gap between what they spend and what comes in as tax revenue. President Obama could authorize bonds to be sold, or he can authorize no bills be paid, or certain bills to be paid.

The question is will Congress start negotiating for real and extend the resolution or will we default and will this put us back into a financial crisis? Will auto loan financing rates go up? Will Congress put the brakes on buying any new vehicles for the military and government?

Hyundai is the only car company, so far, that has come out with a program to help the federal employees. It is called the Assurance program. According to the press release, “We recognize the impact on family budgets that the furlough will drive,” said John Krafcik, president and CEO of Hyundai Motor America. “Like we did almost four years ago when we launched Hyundai Assurance, this is our way of saying ˜Weve got your back during this uncertain time.”

Current owners in the Hyundai family will be provided relief from payments for as long as they are out of work. Furloughed employees who wish to buy a car in October will be offered a 90-day payment deferral.

It is estimated that more than 800,000 workers will not get paid during the shutdown. Like the original Hyundai Assurance job loss protection program, the federal employee payment deferral plan is aimed at helping workers at a time when they most need it. The program is available to any customer who has financed his or her purchase or lease through Hyundai Finance America.

About the Author:

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a member of the North American Car and Truck of the Year (NACTOY), Women's World Car of the Year (WWCOTY), and the Concept Car of the Year.