In the New York Times Bill Vlasic and Nick Bunkley write that:
Even after receiving $15.4 billion in federal loans, General Motors is once again on the brink of financial collapse.
Even if G.M. satisfies Mr. Obama’s other requirements — including reaching a new cost-cutting deal with its unions and persuading its bondholders to agree to sharply reduce debt--the company looks less viable, not more, than it did five months ago.
Some say cost is King and they are correct. In times of plenty it aids in achieving your objective and in stormy times it helps you survive. Let’s examine its role in business and sports.
For profit businesses are judged by the profit they generate. It starts with sales, which are more easily generated in good times. Only a portion of it is profit as a company has a number of costs. Costs that must be controlled. These costs include the material and labor costs of manufacturing (or out sourcing) the product, factory overhead, marketing and sales, G&A etc. There is a reason that a company is successful. It must always focus on that reason. That is the company’s vision. It may use lean techniques, six-sigma, employ black belts etc. but the company must never forget your vision. In stormy times, cost is equally important. Some companies think cost is everything and cut, cut, cut. One of the costs they cut is marketing and sales. Wrong! The old saying is that it takes three years to get a new customer and 30 seconds to lose him. There are cost effective ways of maintaining contact with the customer-large and small. Never do any thing that tampers with the vision.
Sports have expanded and what was a sport is, most likely today a business. That includes the major sport programs of many universities. No matter what, cost--while taking a back seat--is always important. Formula 1 racing is a good example. In its early years it was a true sport. Costs were relatively low, many drivers were wealthy sportsman and the sport was risky. As it grew, cars got more and more expensive; drivers were professional and the sport/business less risky. Cost containment was nonexistent and a manufacturer had to win regardless of the cost. Several people complained that the cost meant only a few teams backed by manufacturers and deep pocket advertisers could be successful. The independent team did not have a chance. Cost containment was the cry but no one paid attention as win was stronger.
The world economy turned down, manufacturers questioned the cost and big time advertisers disappeared. Now cost is being questioned and contained. But in this whole cost containment phase, they must not forget how they got here. They must reduce costs permanently. The vision must be to maintain their high tech image but focused on those features that can ultimately be incorporated into production automobiles. This will keep the vision alive, the manufactures involved and, along with them, the advertisers.
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With the thrust of true cost control, the life blood of Formula 1 is renewed as new competitors consider enter into the fray.
