GM, already has a plan to offload the legacy healthcare issue to a union managed fund, starting in 2010. It is claimed that the biggest loses at GM, are caused by GMAC (Ditech etc. bad loans), which it still owns 49% of. Without the legacy healthcare costs, and some nonwage union issues, (such as full pay during shutdowns), supposedly GMs costs would be much lower.

Basically, TPTB have tried to have a consumer-driven economy while depressing wages. Their answer to "how can people buy cars with depressed wages" has been to have the car buyers run up unsustainable debt. Welcome to 2008.

This is the nature of capitalism and the root cause of crises. The increasing use of debt has been one the chief means of extending the length of the time between crises at the risk of deepening them when they finally do come.

Right now, it looks like the credit shortage will totally destroy the automobile industry; it will price itself out of existance.

How much of the average car cost represents credit? How many people go into a dealership and buy a car with cash?

Not too many.

With credit declining the amount available to individual purchasers to buy a car shrinks. This amount is certainly substantially less than the average cost of a new car in the US, that amount being almost $30,000:

A new car is second only to a home as the most expensive purchase many consumers make. According to the National Automobile Dealers Association, the average price of a new car sold in the United States is $28,400. That’s why it’s important to know how to make a smart deal.

http://www.ftc.gov/bcp/edu/pubs/consumer/autos/aut11.shtm

The amount taken as down payment is instructive, more than $3,000 (with the balance financed by the auto makers themselves). Certainly, people would pay more if they had the means:

Tighter credit standards are forcing many car buyers to put down more cash up front to get a loan.

The average down payment last month was $3,108, up 42% from $2,194 in the same month two years ago, Edmunds.com reports. That's the highest average down payment since the car-buying research site began tracking the number in 2002.

http://www.usatoday.com/money/autos/2008-10-16-automakers-down-payment-c...

The prices of used cars is a better guide since most buyers pay cash for their used cars. Here the most recent figures (2004) suggest the average for a used car at wholesale auction is a little more than $10,000.

The auto auction company ADESA Inc. of Carmel, Ind., reports the average wholesale price in August was $9,086. That was 1.4 percent higher than the price of $8,959 in the year-ago month. It was 2.2 percent lower than the July average price of $9,295.

http://findarticles.com/p/articles/mi_hb6674/is_/ai_n26624947

It becomes a bit of an art to discern what a car would cost if credit is unavailable. It is hard to see people being able in an economically constrained situation to raise ten or more thousands of dollars in cash ... to buy a car. At the same time, it is hard to see an auto industry surviving with their products selling for less than half the price they sell for now. It is also difficult to see any 'alternative' fuel vehicles being viable since costs of production and developement of these vehicles is effectively subsidized by the sale of larger, more profitable SUV's and pick up trucks.

The auto industry is exceptionally complex. The supply chain, the manufacturing process, financing, dealer network, aftermarket suppliers, (not to mention fuel inputs and infrastructure) all require oceans of cash. Removing any part and the whole fractures. The entire system requires second by second management in the current 'just in time' regime. The current situation ... where the US makers are reduced to beggary ... is the result of relatively small inputs against the cost structure of the industry. Even low cost producers are having serious problems:

http://finance.yahoo.com/news/Toyota-to-reduce-output-apf-13616149.html

http://www.nytimes.com/2008/11/19/business/worldbusiness/19chinaauto.htm...

I believe that one should be required to post a comment with a negative greenie. Cheap shots are meaningless

Profit simply enables reinvestment in making the company better and more efficient. Without a profit motive, no one would do anything but sit around.

At least that is what I learned in the cartoon about the shoemaker and the elves I saw as a youngster (the first part -- the second part is just what I'd do).

Hope that qualifies for a negative.

BS

I believe that one should be required to post a comment with a negative greenie.

I don't. The last thing we need is more clutter. If they don't want to explain it, fine.

I find it absolutely halirious the description of socialized health care and then calling the current system better, when in fact everything they say that socialized health care is, isn't and all the current system is, is what they claim socialized health care is.

it was claimed that in socialized health care one will be told where he or she can get care, yet in the so called better privatized and profit based system. THATS exactly what happens, which you point out. if you have x insurance, you can only go to who takes x insurance.

I have had a 20 year interest in the American health care system. I grew up in Canada, went to medical school at McGill University, then moved to the US for residency in Family Medicine and worked in community health centers until I "retired" a few months ago to take care of my kids. My husband is a specialist physician, recently graduated.

Here's my take on Tom Daschle's proposals for health care. I am not terribly excited, but we shall see. The following are quotes from a Huffington Post article at http://www.huffingtonpost.com/sen-tom-daschle/progressive-solutions-to-_...

There are three fundamental problems plaguing our health-care system today: skyrocketing costs, lack of access, and disparity of quality care.

Today, 47 million Americans lack health-care coverage. Just as troubling is the fact that medical bills have become the leading cause of bankruptcies in the United States. It is projected that the U.S. will spend nearly $2.4 trillion on health care this year. That is almost $7,500 per person. Premiums have increased [PDF] nearly 98% since 2000. Most troubling is that this increase is nearly four times faster than the growth of wages during the same period.

For individuals that do have health care coverage, the quality of health care they receive is often inadequate. For instance, the U.S. lags behind other industrialized countries in basic health measures such as life expectancy and infant mortality. Moreover, we have less same-day access to primary-care physicians as individuals in other countries. And, it is estimated that 98,000 Americans die annually from medical errors, caused by bad physician handwriting, incomplete charts, or other "low-tech" problems.

So far, so good. Except, I would say, that in all the literature I read about infant mortality and life expectancy, it was less than clear that those are problems that can be remedied by medical care. The Surgeon General was quoted as saying that medical care accounts for 10% of health outcomes. Those two, particularly, are strongly related to income inequality, public policy, drug use, racism, you name it.

Onward with the quote:

The time is now for us to take this challenge head-on. What we need is a change in approach. In my book, Critical: What We Can Do About the American Health-Care Crisis, I have proposed a Federal Health Board (emphasis added) that would be a foundation from which we could address all three problems. In many ways, the Federal Health Board would resemble our current Federal Reserve Board for the banking industry. Just as the Federal Reserve ensures certain standards, transparency and performance for our banking industry, the Fed Health would ensure harmonization across public programs of health-care protocols, benefits, and transparency. Ultimately, the Fed Health would offer a public framework within which a private health-care system could operate more effectively and efficiently.

I'm not sure comparing anything to the financial system works to anyone's favor in these times, but anyway, interesting.

The Fed Health could help reduce administrative costs. Roughly 30 cents of every dollar in health care is spent on administration rather than health benefits. Our administrative costs, on a per capita basis, are seven times higher than that of our peer nations. Each state has their own system for Medicaid and insurance regulation. We have different health-care systems for active duty military members versus veterans. And private insurers spend billions trying to enroll the healthy and avoid the sick. A Federal Health Board that sets evidence-based standards for benefits and quality for federal programs and insurance will lower this complexity and thus costs.

We already have programs with low administrative costs, called Medicaid and Medicare. I'll admit, I have been impressed by my firsthand view of the Canadian medical system. I'm not sure how this will be an improvement.

The Fed Health could also promote quality and save money by making the health-care system more transparent. Today, the lack of transparency in the system makes it virtually impossible for people to grasp what they are paying for and who provides them with the best care. This shroud of secrecy allows for wildly different prices for similar quality care. For example, a Pennsylvania report on heart surgery found hospitals with similar outcomes charge from $20,000 to $100,000. The Board, by ensuring transparency, would increase competition based on price and quality rather than cream skimming and cost sharing.

Oy vay... I thought we had established the reasons why competition in health care is of a completely different stripe than, say toasters, or cars... I want to see who will shop around while suffering from undiagnosed symptoms to determine the best place for treatment of what they don't yet know they have.

Additionally, the Fed Health could set standards for quality and coverage, promoting best practices and identifying the trade-offs on services. It would use information on the comparative clinical and cost effectiveness of different treatment options to set standards for Federal programs. The Congressional Budget Office recently credited this idea with the potential to produce substantial system-wide savings.

That could be useful.

But the Federal Health Board is just one element of comprehensive reform that would drive down the cost of the system. Cost shifting, preventable illness, and uncontrolled chronic disease add to our health care costs - and will be reduced by insuring all Americans.

Unfortunately, I don't believe this. As a practicing family physician, I can tell you I was waging a losing battle against the food "industry", and what unemployment does to alcoholism rates. Preventive care is not cost effective, except in the case of vaccinations. Sorry. (Not that we shouldn't have health care, but it's not to save money, it's to improve quality of life).

The decisions made by the Federal Health Board would be tough. But this model undoubtedly beats the alternative. Imagine what would happen if Congress revoked the Federal Reserve's power to set interest rates and decided to legislate new interests rates instead. It would be a disaster - no less so than the results of mismanagement of our health-care system.

OK. Too bad. Expected more from the Hopefully Smarter Than Yeast President-Elect.

I wonder if Hillary would have preferred this post...versus Secty of State.

could it be the downside of the market is a response to Obamas cabinet picks?

You appear to be happy for people earning low wages, perhaps $7 an hour, to either provide for medical attention for themselves and their families or go without, and what is more you refer to them with contempt as being wasters for not having put sufficient aside from their vast incomes to pay a doctor who might get $100,000 a year.

One perhaps hopes that in the world you wish to inhabit, if you were taken hostage for ransom as is commonplace in the more 'forthright' societies you seem to admire such as in South America, that no efforts will be made to pay your ransom or attention paid to your whining about being tortured since you did not provide enough for bodyguards.

Cancer can be torture too, you know.

Your lack of humanity is hopefully merely due to immaturity.

Downgrade explanation: I believe Canadians would not overwhelmingly vote for an American medical system for themselves. Having been a physician in both systems, I can tell you Canada's is more fair, though income-related health disparities persist. The final observation is that Canada's life expectancy is higher, that this is probably the result of public policy, and it is my strong belief that we should stop harping on health care and implement the policies that will result in the least suffering. Thinking outside the box. Finding the spot with the best leverage.

Also, see DaveMart below - I agree. I have met thousands of low-income people, and can vouch for having acquired a respect for the strength of character it takes to keep on going when you are homeless or doing worse than the majority of society. The attitude that the poor are less virtuous (or they wouldn't be poor) is deplorable.

Davey Boy,,,,don't know much about the US?

The new plants built in Indiana, my home state another lifetime ago, as a rule, hire the older more mature workers for the lines. They have that, Midwestern work ethic not found in the youth of today or in the UK. The last Greenfield Auto Plant was built by Honda, actually a very good company in many ways, and I believe just opened a short time ago in Indiana. Cost of transportation for the finished product to market, the Steel, made and finished in the Midwest, also has a great deal to do with transportation cost. Tax abatements from local governments go into the mix as well. Pensions and healthcare have actually very little to do with it.

Almost nothing is made in Detroit or the UK any longer. Except crap cars.

There is also no "right" for individuals to have high-paying jobs.