NEW YORK (CNN/Money) - GM's warning on Thursday that it's cutting back its 2005 earnings outlook underscores some tough problems for U.S. auto makers.
True, the burden of health care costs, especially for an aging work force, is a challenge, especially when many of its overseas competitors do not pay similar costs for their workers. And it's a tough environment globally with more and more competitors. In addition a falling dollar doesn't help U.S. car makers much when countries like China peg their currency to the dollar.
But another challenge lies right here at home: the bargain-conscious U.S. consumer. Without incentives, people aren't as enticed to buy cars, and deeper discounts eat into the auto makers' bottom lines. Yes, they can make up some of that deep price discount by financing the cars they sell, but they can only make up some of it.
Currencies can become unlinked from the dollar -- someday -- and maybe policymakers here will even find a way to ease the burden of health care costs on workers and their employers. But the lure of the price cut is deeply ingrained in consumer consciousness here, and that's unlikely to go away anytime soon.
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