Federal officials unsure about California bailout

In the Los Angeles Times, an article by Peter Nicholas and Richard Simon addressed this issue. I cannot understand how we we can bail out California if they do not have a plan on how it would be repaid from current revenues not projected ones., It my understanding that California is one of the most highly taxed states in the country. Where is their fiscal responsibility? Can you tax yourself out of this? I do not think so. You need to reduce payment to those that are not paying taxes and are enjoying our free services. Get the budget balanced, determine how the government loan, if any, is repaid, and set a budget that reflects current revenues.

http://www.latimes.com/news/local/la-me-california-budget22-2009may22,0,153010.story

General Motors moves to shed 1,100 dealers

That was the title of a recent article in the Los Angeles Times by Ken Bensinger, Andrea Chang and Tiffany Hsu. My immediate reaction is that it appears that the factories did not do a good job of communicating with the dealerships. What dealership network did they want--small towns or potential high volume? What did they really expect the dealerships to do in unit sales? Many small town dealerships were individually profitable with service and they put $ into the local economy. What does it cost the companies to maintain any dealership? Many questions and not a lot of answers. MY next reaction is OLD BOYS management and it should have been done a lot of years ago. We are noncompetitive with our competitors and should have known this for years.

What stupidity!

G.M., Leaking Cash, Faces Bigger Chance of Bankruptcy

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.