Home
Journal
 
Back
 
Stimulus Could Aid Builders, Clean Tech

Azcentral.com
February 10, 2009


Homebuilders, automakers and green-energy firms could be big winners in the stimulus sweepstakes.

Those sectors, among the hardest hit by the recession, could be in the best
position to cash in once Congress gives final approval to the economic stimulus
measure that President Barack Obama has been pushing.

The bill moved one step closer to passage Tuesday after the Senate approved an
$838 billion economic recovery plan. An $819 billion package has already won
approval in the House. The plan now goes into tough House-Senate negotiations
before a final vote that could come by this weekend. Passage of the bill assumed
new urgency Monday after Obama warned of a deepening economic crisis if Congress fails to act.

Data released last week showed that employers shed a staggering 598,000 jobs in
January - the most in nearly 35 years. The job losses raised the country's
unemployment rate to 7.6 percent and underscored the rapidly worsening economic outlook.

Though the fine print of the stimulus package is still being hammered out,
analysts expect the final plan to focus, in part, on public infrastructure
projects, green energy, housing and automakers.

Here's a roundup of some of the sectors of the economy that stand to gain from the plan:

- Construction

The stimulus is expected to provide less infrastructure spending that originally
proposed. But the plan will likely still pour billions into new bridges, roads,
ports and other big-ticket projects.

Sung Won Sohn, an economics professor at the Martin Smith School of Business at
California State University, said infrastructure spending can provide a big jolt
to the economy because "most of the money stays in the country."

Smaller-scale projects such as new swimming pools, parks and baseball diamonds
are also expected to get funding as state and local governments look for
"shovel-ready" projects that can be started quickly.

That's good news for heavy-equipment makers such as Caterpillar Inc. The world's
largest maker of mining and construction machinery has laid off thousands of
workers amid waning demand for its products. It's hoping that stimulus dollars
will slow the slide.

"We think it's a smart investment," Caterpillar spokesman Jim Dugan said of the
proposed infrastructure spending. "It's something we know can quickly create
jobs and help put people to work."

It could also funnel money to some of Caterpillar's biggest customers, allowing
them to buy more backhoes, tractors and other machines.

"We think that's a likely scenario," Dugan said.

- Homebuilders

The stimulus includes tax credits aimed at turning around the battered housing
industry. Under a plan approved by the Senate on Wednesday, homebuyers could get
a tax credit of 10 percent of the value of new or existing homes, up to $15,000.
The House limits the tax credit up to $7,500 for first-time homebuyers who
purchase homes before July 1, 2009.

The measures could help reduce the huge glut of homes that has wreaked havoc on
the industry and helped drag down property values. That would be a boon to
homebuilders such as D.R. Horton, the nation's largest, and its rival Centex Corp.

Sales of new homes fell in December to the slowest pace on records dating to 1963.

The tax credit for homebuyers "will put the floor on the downward spiral" in
home prices," according to Jerry Howard, chief executive of the National
Association of Home Builders, which lobbied for the measures.

- Alternative energy

Obama has touted green energy as a way to create jobs and reduce the country's
dependence on fossil fuels. The stimulus includes money to boost alternative
energy products and increase efficiencies in buildings.

The sector got off to a strong start last year with record investments in new
projects. But falling oil prices and frozen credit markets have taken a toll.
Venture capital investment in the industry hit a record $4.7 billion in 2008.
But those investments plunged 44 percent in the fourth quarter to $954 million.
Many in the sector are hoping the stimulus will keep the industry growing. The
plan includes $14.4 billion for government energy efficiency and
renewable-energy programs, $4.5 billion for a smart electricity grid, $2.9
billion to weatherize modest-income homes and a tax-credit extension for
renewable-energy production.

- Automakers

The Senate's version of the recovery plan includes tax breaks that would cut the
cost of new cars and seek to stem Detroit's sharp sales declines. Under a
measure approved by the Senate, interest payments and sales taxes on new cars
would become tax-deductible.

The $11 billion tax break would apply to new cars bought from November 2008 to
through 2009. Individuals with incomes under $125,000 and couples making less
than $250,000 would be eligible, regardless of whether they itemize their deductions.

The plan comes after a brutal January for every major U.S. automaker. Chrysler's
U.S. vehicle sales plunged 55 percent, General Motors' 49 percent and Ford's 40 percent.

The stimulus could also make the government a big Detroit customer. Democrats
want to spend $600 million to replace the federal government's fleet of cars
with hybrid vehicles.

Such a plan would "be a huge boon" to struggling automakers, said Timothy J.
Yeager, a former economist for the Federal Reserve Bank of St. Louis and a
finance professor at the University of Arkansas.

"They're really hurting right now, so that could give them a lift," he said.
Type Size: A A A Print Email Most Popular Buzz up! Add your comments
Make your voice heard

This is a public comment zone. Readers are solely responsible for the content of
their posts and must comply with our Terms of Service and Rules of Engagement.
Report offensive content by clicking on the "Report abuse" link.

 

Promoting Green Building Design, Construction and Operation, Sustainable Living,
Clean Technology, Renewable Energy Resources and Energy Independence