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Automakers and homebuilders among winners
Where money goes will help shape fortunes of companies and communities, academic says
- Bloomberg
- Published: 23:04 February 10, 2009
Washington: The Ford Motor Co and the Centex Corporation, the second-largest US homebuilder by sales, would be among the biggest winners under the $838 billion (Dh3,077 billion) stimulus measure.
The Senate is more generous to automakers and homebuilders than the House was in the $819 billion measure it passed last month. Alternative-energy companies and closely held builders such as Sundt Construction Inc in Tempe, Arizona, fare less well under the Senate bill.
President Barack Obama is counting on the plan to help revive an economy that has lost 3.6 million jobs since December 2007, sending the unemployment rate to the highest level since 1992. The plan would trigger the biggest burst of public works spending since the interstate highway system was started in the 1950s.
Where the money goes will help shape the fortunes of companies and communities, said Rogan Kersh, associate dean of New York University's Wagner School of Public Service.
"In a bill this big, there are countless private-sector winners and losers."
The Senate cleared a procedural hurdle on Monday by voting 61 to 36 to end debate on the measure, with three Republicans siding with Democrats. Senate approval of the bill would force the two chambers to work out their differences.
Ford, General Motors Corp and Chrysler LLC, along with overseas-based rivals that produce vehicles in the US would benefit from an $11 billion provision in the Senate bill that would let car buyers deduct interest on auto loans and local sales taxes from their income taxes.
"Tax deductions on auto loans are very beneficial to a customer," Mark Fields, Ford's North American chief, told reporters on February 4. "On a $25,000 car, that can save you $1,500 to $1,600."
US auto sales fell 37 per cent in January, the worst sales month since 1981. GM and Chrysler have received government aid to try to stave off bankruptcy.
"We really need consumers to just walk in the door of dealerships," said Wade Newton, spokesman for the Alliance of Automobile Manufacturers, a Washington trade group for 11 auto-makers that backed the provision.
"This is a crisis of consumer confidence."
Centex, D.R. Horton Inc, and other US homebuilders might see sales increase as consumers used a planned tax credit of $15,000, or 10 per cent of the purchase price, whichever is less, under the Senate legislation.
"If someone's going to give you $15,000 in free money it has to be stimulative," said Eric Landry, an analyst at Morningstar in Chicago.
"If nothing is done, we're looking at another year of significantly lower starts."
The new credit doesn't have to be repaid, and all homebuyers are eligible. It would replace a $7,500 tax credit for first-time buyers, passed last year, that had to be repaid over 15 years.
"We're pretty happy with the way the Senate bill is shaping up," said Jerry Howard, president and chief executive officer of the National Association of Home Builders.
"We think it will entice a lot of those people sitting on the sidelines into the marketplace."
Howard said the group is "going to throw the kitchen sink" at the House to keep the provision in the final stimulus bill.
Companies anticipating a boost from public-school construction funded by the House bill will be disappointed if the Senate measure prevails. It eliminates almost all of the $20 billion the House allotted for that purpose.
"It's penny-wise and pound-foolish," Doug Pruitt, chief executive officer of Sundt Construction, said of the Senate cuts. "They're not thinking about the future." Sundt gets as much as 20 per cent of its revenue from school construction, Pruitt said in an interview. "There are a lot of those projects that are ready to go right now," he said.
The school-construction money was removed from the Senate bill because some lawmakers thought the funding should be taken up as part of the regular budget process, Senator Lisa Murkowski, an Alaska Republican, said in an interview. She said she would be voting against the stimulus bill.
"Construction jobs are the clearest short-term stimulus you can produce because it is an immediate job for people within the construction industry who right now are facing steep unemployment," said Randi Weingarten, president of the American Federation of Teachers.
"The notion that this was waste, not stimulative, doesn't make any sense to this 11th grade Social Studies teacher," she said.
Companies that make wind turbines, solar panels or advanced lighting are hoping for the final passage of the House measure, while those that want to make electric cars or build clean coal or nuclear plants prefer the Senate bill.
"One of the things that happened is the House version had more robust spending for green energy and the Senate version has got caught up in political give-and-take," said Rick Gittleman, who heads the renewable energy practice at the law firm Akin Gump Strauss Hauer and Feld LLP.
The differences may have alternative-energy companies fighting General Motors and Southern Co., the largest US electricity generator, for language favourable to their interests.
The House bill includes grants from the Energy Department for sponsors of renewable energy projects.
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