November 27, 2008

THREE REASONS FOR THE AUTO CRISIS

Kevin Zeese, Op Ed News - Corporate-government created the three major causes of the auto industry crisis: health care, the credit crunch and low efficiency cars.

Health care is an out of control cost where double digit annual price increases are more common than rare. While other industrialized nations have controlled the cost of health care, the United States has not. . . While health insurance is on the Obama-Kennedy agenda, they are still not challenging those industries as they should and not confronting the real problems.

Every business small and large has struggled with paying the health insurance costs of their employees. It has held back hiring and holds back wages. A mega-corporation like General Motors sees those problems amplified. It would not be unfair to describe General Motors as a health insurance provider who happens to make cars. GM spends $5 billion annually on health care for 1.2 million people – only 150,000 of whom work for the company. GM, Ford and Chrysler have a combined unfunded retiree health care obligation of more than $90 billion. Health care adds $1,500 to the cost of each vehicle. This reality alone makes it virtually impossible for GM to have a successful economic model and it is not something GM can fix. Health care is a major problem not only for the auto industry, but the airline and steel industry as well as businesses of all size. The failure of Congress to face up to single payer health care is becoming a threat to the American economy.

The second major cause of the current auto industry crisis is the crash of the credit markets. This has made getting loans to purchase cars more difficult and has resulted in a massive drop in automobile purchases. The U.S. auto market fell 15% through the first 10 months of 2008 and sales in October plunged 32%. Why? The lack of available credit for potential car buyers. And, on the other end, the industry cannot get loans to cover the dramatic loss in car sales.

The credit crisis is also not the fault of the automobile industry. The cause of the credit crisis falls back on bad government that allowed the stock market to be turned into an unregulated casino. The Federal Reserve, Treasury Department, Congress and regulators failure to apply basic regulation to the financial markets and money supply are to blame but now Congress wants to put the blame on the auto industry rather than accept responsibility for their failure and clean up the mess.

The third cause, inefficient 20th Century automobiles rather than forward looking efficient 21st Century green cars is a shared error of government and the auto industry. The Congress did not have the political will to demand energy efficiency, indeed they provided a tax credit for SUV purchases, and the auto industry lobbied to prevent such standards.

All there of these causes have the same source: corporate controlled government. The health insurance industry did not want the more efficient single payer national health insurance. The finance industry wanted to be free to treat the stock market like a casino, liked the Fed’s easy money and did not want to be regulated. And, the auto industry did not want to be told to build more efficient cars. Corporate-government is the root of the problems we face today.

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