2 Risks for Ford Motor Company (F) and General Motors Company (GM)

Where’d my cash go?!
On Jan. 1, when the payroll tax cut expired, automakers and retailers held their breath, hoping it wouldn’t cause an immediate decrease in consumer spending. It didn’t have an effect on numbers in January, although it’s possible we could see it cause a slowdown in spending in the coming months. This is a real threat: Automakers are increasing estimates, and the consumer is a finicky creature who could abruptly change its spending habits. If the consumer sees the effect of the tax expiration, then it will be important for investors to watch its influence on spending. I believe this tax expiration is partially offset by record-low interest rates that will probably remain for the rest of 2013. However, when interest rates do rise in the future, it will exemplify this tax risk even more. This is especially true at a time when the consumer is deleveraging at a faster pace than seen in decades and has less cash to spend.

Bottom line
There remains uncertainty in our economy, even as we continue to see improvement. The risks I highlighted could cause a slowdown in auto sales in the second half of 2013, causing problems with the automakers’ estimates and thereby trickling down into other areas. But I believe there are enough positive factors that outweigh those risks. We have support from pent-up demand, improving home values, low interest rates, and declining (albeit slowly) unemployment. Those factors should be enough to have a nice year of sales for automakers, and they seem to agree. I think those factors also make Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) strong buys, unless we see those risks gain momentum toward the back half of the year.

The article 2 Risks for Ford and GM originally appeared on Fool.com.

Fool contributor Daniel Miller owns shares of Ford. The Motley Fool recommends Ford and General Motors and owns shares of Ford.

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