Howes: Michigan, hometown autos gird as coronavirus confirmed here
Leaders of Detroit’s retooled automakers long have groused about their stuck-in-neutral share prices, wondering what it will take for investors to believe in them.
One answer is demonstrating the financial heft and business acumen needed to navigate a substantial economic slowdown, even recession. They may soon get the chance: wildly gyrating financial markets, fears of travel, new orders banning large gatherings and yet more coronavirus cases are certain to change consumer behavior more than they already have.
The question is for how long — and whether a slowdown is already here.
College basketball’s March Madness games, starting next week, will be closed to public spectators. An order banning large gatherings in San Francisco means the NBA’s Golden State Warriors would play to empty stands. And St. Patrick’s Day parades are being canceled from Ireland to Detroit, Chicago and Pittsburgh.
Airlines like Delta, American and Southwest are cutting flight schedules and costs in response to a sharp fall-off in demand. Michigan’s Big Three universities, each led by a medical doctor-turned-president, are suspending in-person classes — pieces of the latest waves of news for average folk to digest and decide whether to go shopping, out to dinner or to a dealer showroom.
Gov. Gretchen Whitmer used a news conference to ask residents and businesses to cancel or reschedule large gatherings, to consider tele-work, to limit non-essential work, adding: “It’s on all of us to be safe and be smart for ourselves, our loved ones, our co-workers and the public at large.”
Businesses are limiting the size of meetings and barring non-essential travel. Jittery consumers are stocking up on (if not hoarding) wipes, hand sanitizer, toilet paper and over-the-counter meds. And plunging financial markets, exacerbated by a Russo-Saudi oil war, signal investors’ search for a plan and a bottom to the carnage that officially ended the 11-year bull market Wednesday.
The Dow Jones Industrial Average shed 1,465 points, or another 5.86%, to close at 23,553. The S&P 500 lost nearly 141 points, off another 4.89%, and the tech-heavy NASDAQ dropped 392.20 points, or 4.7%. The sell-off punctuated the World Health Organization's declaration of coronavirus as a global pandemic and, second, the implied demands by investors for a credible plan from the Trump administration to manage the crisis.
The administration is pushing a payroll tax cut to last at least through the November election, as well as considering a plan to offer low-cost loans to affected businesses and extending the April 15 deadline for filing tax returns. House Democrats are expected to vote as early as Thursday on a package including support for paid sick leave, unemployment insurance, food assistance and help for small businesses.
Consumers willing to spend money drive some two-thirds of the rich U.S. economy, a key reason the markets in less than a month have dropped roughly 20% from their highs and moved into “bear market” territory. An overriding market concern: what can be done to forestall a virus-induced recession, to restart growth in the economy and corporate earnings — and how soon?
Less than 24 hours after state officials confirmed two cases of coronavirus inside Michigan, many of the state’s public universities suspended classes on campus; the University of Michigan canceled spring football practice until April 21; and the governor and Detroit Mayor Mike Duggan detailed plans to respond to the virus.
Whether all this mounting angst will culminate in an economic slowdown depends on how long it lasts; what kind of damage it leaves, including the human toll; whether the impact leaves consumers wary — or ebullient, relieved that the worst is over and it's time to spend again.
As priorities go, buying cars, trucks and SUVs in such an environment isn't necessarily among the top ones. And that has a knock-on effect that can dent both top and bottom lines by slowing production, eating cash and reducing room to maneuver. In that, each of Detroit’s three are in sharply different phases of their collective reinvention.
If it lasts long enough, the exogenous shock of the coronavirus pandemic could reveal just who's prepared to navigate tougher times, and who isn’t. Either way, the decade-long run of prosperity coming out of the Obama-era bailouts is moving into a choppier phase — and the Motor City should brace for the turbulence.
Daniel Howes’ column runs most Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN. Or listen to his Saturday podcasts at detroitnews.com or on Michigan Radio, 91.7 FM.