* Fears hitting sales, capital spending plans
* Corporate profit growth seen picking up in 2013
* Washington saber-rattling seen as bargaining technique
* Some execs presuming a deal will get done
By Scott Malone
BOSTON, Dec 12 The "fiscal cliff" is less than
three weeks away, but most corporate executives are not
strapping on their parachutes just yet.
A cross-section of executives from companies including
DuPont Co, Saks Inc, Aetna Inc and 3M Co
on Wednesday warned that the standoff adds an element of
uncertainty to an already tepid U.S. economy.
But many expressed confidence President Barack Obama and the
Republican-controlled House of Representatives will reach a deal
and avoid the worst-case scenario of tax hikes and sharp cuts in
federal spending beginning next year.
"I think the fiscal cliff is on everybody's mind," said
Stephen Sadove, chief executive officer of Saks. "It's certainly
a solvable issue."
Despite all the warnings that failure to reach a deal could
send the United States back into recession, corporate executives
and Wall Street analysts are forecasting accelerating profit
growth in 2013.
The companies in the broad Standard & Poor's 500 index
are expected to experience a 10.9 percent rise in profit
next year, according to Thomson Reuters I/B/E/S poll of
analysts. That is well ahead of the 3.9 percent expected for
Those bullish forecasts by and large presume that President
Obama and the House Republican leadership reach a deal.
"We're pretty much assuming the cliff gets solved," said
Aetna Inc Chief Financial Officer Joe Zubretsky. The
health insurer said it expects earnings to grow about 6 percent
Diversified manufacturer 3M on Wednesday forecast profit
growth of about 8 percent next year - below its long-term 10
percent forecast but still taken as a respectable forecast by
investors, who bid its shares down just 0.6 percent to $93.12 on
the New York Stock Exchange.
Still, CFO David Meline said the budget standoff had taken a
toll on revenue at the maker of Post-It notes and films used in
"There has been some impact in the market as a result of the
uncertainty that's out there generally in the economy and
certainly accentuated by all of the indecision that we see in
Washington right now," said Meline. "It has slowed the
CVS Caremark Corp CEO Larry Merlo said he was hoping
for a deal.
"If it were to remain unresolved for an extended period of
time it would eventually impact our business," Merlo said. "Our
hope is that Washington's leaders would not allow that to
HOLDING OFF ON SPENDING
The worries do have top CEOs holding back on spending --
DuPont Co's Ellen Kullman told Reuters on Wednesday that
the chemical maker had trimmed its capital spending plans as a
result of the standoff.
"We're not going to spend as much as we thought next year,"
she s aid. "We've looked at every program and asked, 'Can we
spend less money now and delay some programs six months?'"
Less than three weeks remain until the cuts, which were
agreed to during the 2011 debt-ceiling debate, take effect. But
as the deadline ticks closer, CEO confidence in the U.S. economy
has held almost steady.
A quarterly survey by the Business Roundtable released on
Wednesday showed that CEO confidence in the U.S. economy slipped
a tad after dropping sharply to a three-year low in September.
The picture was mixed, with CEOs saying they were less
likely to cut U.S. jobs in the next six months but more likely
to cut U.S. capital spending.
The fiscal cliff standoff is just one of the concerns facing
executives, who are also confronting a continued economic crisis
in Europe and uncertain demand in Asia, said Boeing Co
CEO Jim McNerney, who chairs the Roundtable.
"It's not the only headwind we face, but it is significant,"
McNerney said. "We would be recovering faster if it were not for
the political uncertainty that we're facing."
U.S. House of Representatives Speaker John Boehner, a
Republican who is Obama's counterpart in the negotiations, on
Wednesday warned that "serious differences" remained between the
two sides. The two parties differ about the right mix of higher
revenues and lower spending to plug the long-term budget gap.
The saber-rattling on either side of the aisle has not fazed
CEOs, many of who see it as a negotiating tactic.
"The way this deal will get done is when both sides put
their hands on a proposal together just before the vote has to
take place," said Goldman Sachs Group Inc CEO Lloyd