The
Business Journals...
CEOs
say
government fiscal flux a black cloud over hiring, sales
by Kent
Hoover, Washington Bureau Chief
Wednesday,
June 20, 2012
The CEOs of
the nation’s largest corporations are dialing back their expectations
for
sales, hiring and capital investment -- and it’s largely Washington’s
fault.
That’s the
message from the latest survey of Business Roundtable members. The
second-quarter survey found that 75 percent of big-business CEOs expect
their
sales to increase in the next six months, down 6 percentage points from
their
first-quarter expectations. The survey found that 43 percent of CEOs
plan to
increase capital spending, a decline of 5 percentage points. And only
36
percent of CEOs expect their companies will increase employment -- a
decline of
6 percentage points. Twenty percent of CEOs expect their companies will
lay off
workers.
Job cuts
already are happening at aerospace companies, said Boeing Co .
Chairman and CEO Jim McNerney, who chairs
the Business Roundtable.
That’s
because of $1.2 trillion in federal spending cuts that automatically
will go
into effect at the end of this year unless Congress finds an
alternative
solution to reducing the deficit. Half of these across-the-board cuts
-- a process
known as sequestration -- will occur in the defense budget.
Large
defense contractors, such as Boeing, “are taking actions today” to
prepare for
this potential lost revenue “because we can’t afford to just wait till
the last
minute,” McNerney said.
“There’s no
way to approach the prospect of sequestration without hedging a bet,”
he said.
Congress’
failure to decide what to do about tax rates that are automatically
scheduled
to go up Jan. 1 also is causing businesses to lean “back in the saddle
as we
approach the end of the year,” McNerney said.
“I think
the concern is significant because we don’t know how corporations or
individuals will be taxed,” he said.
Assurances
from Congress that these spending and tax questions will be settled
after the election
aren’t enough for business leaders, especially after last year’s
failure of the
“super committee” to agree on a long-term plan to address the federal
government’s huge debt load.
“We have
yet to regain faith that the process will deal with it,” said John
Engler,
president of the Business Roundtable.
A temporary
extension of current tax rates wouldn’t do much to encourage businesses
to
expand because that would just continue “the limbo we find ourselves in
today,”
McNerney said.
“We would
all advocate for an imperfect solution vs. waiting forever for a
perfect
solution,” McNerney said.
U.S.
corporations also can expect to see lower sales in Europe, as a result
of the
sovereign debt crisis and accompanying economic slowdown there.
Meanwhile, China’s
economy isn’t growing as fast as it had been.
But
Washington is the biggest thing holding business back, especially when
you add
uncertainty over regulatory policy to the mix. Many companies are
holding back,
waiting for clarity on these issues. If that ever happens, “there are
lots of
projects that will be unleashed,” McNerney said.
Read this
and other articles at the Business Journals
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