Howes: Washington dysfunction weighs on business, growth prospects

Listen closely to auto executives gathered in Detroit last week and you could detect a common, if muted, complaint: Washington is weighing on the industry and its outlook. 

That could become a real problem this year, nearly a decade after two of this town’s automakers emerged from bankruptcy to jumpstart their long road back to respectability. Uncertainty looms. Auto executives from the Motor City to Guangzhou used the Detroit auto show to politely lament serial dysfunction in President Donald Trump’s Washington, confirming the honeymoon between Detroit and the White House is long since over.

The confusion, exacerbated by the longest government shutdown in American history, is complicating decision-making, delaying investment and undermining the stability business craves, a pre-condition to making billion-dollar bets on plants, products and people. It's potentially slowing an economy expected to keep driving auto sales through this year, a critical driver for the continuing economic expansion in Michigan and Detroit, its largest city.

In advance of the World Economic Forum this week in Switzerland, the International Monetary Fund warned that the global economic expansion is losing steam. Polling shows blame for the continuing shutdown accruing more to Trump than the newly empowered Democrats. And the University of Michigan's closely watched consumer sentiment index late last week reported its largest drop since Trump became president.

"The decline was primarily focused on prospects for the domestic economy, with the year-ahead outlook for the national economy judged the worst since mid-2014," the survey's chief economist, Richard Curtin, said in a statement. "The loss was due to a host of issues including the partial government shutdown, the impact of tariffs, instabilities in financial markets, the global slowdown, and the lack of clarity about monetary policies."

And PwC's 22nd global CEO survey found a turnaround in sentiment from the year before: "Optimism among North America’s CEOs dropped the most sharply, from 63 percent to 37 percent," it reports, "while the percentage signalling a slowdown in global growth moved from a negligible 3 percent to 28 percent."

Disincentives are mounting. Tariff and trade tensions are slowing the world's largest economies, with China officially pegging its growth rate at 6.4 percent in the final three months of last year — the slowest since the global financial meltdown a decade ago. Trump's threat to levy 25-percent tariffs on foreign-made vehicles bound for the United States (and to leave in place tariffs on foreign steel and aluminum) are unnerving both domestic and foreign automakers.

Item: China's GAC Motor said last week it is delaying plans to enter the rich U.S. market by roughly a year. The automaker, based in the southern Chinese city of Guangzhou, cited the proposed Trump tariffs. "This will hurt our competitiveness in the U.S. market as a new player," President Yu Jun said in an interview through an interpreter.

Item: One of Fiat Chrysler Automobiles NV's cash cows, the redesigned Ram 3500 heavy-duty pickup, has yet to receive its emissions certification from the Environmental Protections Agency. The bureaucratic hold-up is caused by the federal shutdown, CEO Michael Manley told The Detroit News: "At some point, they need to be certified."

Item: General Motors Co. and rival Tesla Inc. want Congress to revise its electric-vehicle tax credit program to help expand market adoption of all-electric cars like GM's Chevrolet Bolt and Tesla's Model 3, its pricey compact entry in the slowly expanding segment. But the Democratically controlled House and the White House are locked in a shutdown stalemate, and re-upping EV credits is not likely to be a priority for either side once the impasse breaks.

Item: Ford Motor Co.'s executive chairman, Bill Ford, used an interview that closed media days at the North American International Auto Show to lament the lack of civility coming from Washington. The budding partnership between Detroit and Trump's White House in the early days of his administration has assumed a more adversarial tone as the president learns that publicly traded companies and their executive teams don't work for him.

"There's very little getting accomplished," Bill Ford told me during a wide-ranging conversation dubbed "The Final Word" by show organizers. "That makes it hard for businesses to operate. Not just Ford, but any business, because we make decisions and they are billion-dollar decisions-plus ... and we're doing it now kind of flying blind."  

Fractious, increasingly parochial politics — in Washington, in Britain, in the European Union nations of France and Germany — are shaking the global consensus forged after World War II, upending  assumptions held by several generations of business leadership and empowering a new kind of economic nationalism.

The disruption and the uncertainty that goes with it are likely to get worse before they get better, especially if leaders expected to lead mostly refuse to do so.

daniel.howes@detroitnews.com

(313) 222-2106

Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.