Auto Bailout Leads to New Car Color: Budget Deficit Red
What Have We Learned From Wall Street to Main Street
In recent months we’ve seen Wall Street and Main Street reveal their potholes and infrastructure issues. From the investment savvy to the corporate giant to the leading minds of those who should know but apparently don’t. So, what does that say for where we are? It actually says more about where we’ve been and what we’ve forgotten: sound business practices and core financial principles. Remember the days when we managed costs and grew revenues the old-fashioned way? We earned the customer’s business. We sold products the customers wanted with substance and not flash. We made sure we could compete, and we did. So what changed? We did and we need to change again.
Innovation and Sustainability: Top Line, Bottom-line
Historically, when it counts, the United States has been able to be more productive, creative, and innovative than any other nation. We have been more diversified in our workforce and our capabilities and we’ve been able to adapt and change because of it. The one thing previous generations were never caught doing (until, say, the last 50 years) was being complacent or believing others weren’t going to try to replicate our success. Then success bred the seeds of complacency and myopia.
Today the Wall Street and Main Street, bailouts demonstrate the state of our perspective on competitiveness in many industries and on competitiveness itself. It is (as a nation) a skill we are losing because we are failing to be INNOVATIVE in our business capabilities and models, which means taking the best of entrepreneurship (adaptability, creativity, responsiveness) and combining it with the disciplines of sound business (financial controls, cash management, oversight). Businesses including in the automotive industry have within them the capability and the “DNA” to succeed, but they fail to recognize it, harness it, and capitalize upon it.
Cost cutting can only go so far to improve performance. Businesses aren’t in business to cut costs. They should prevent unnecessary costs from occurring in the first place. Businesses are in business to create revenues! Again, the automotive industry is a classic example: Build products no one buys and cut all the costs you want and still operate at a loss. If you are incapable of being responsive (and rapidly responsive) to your markets, if you cannot analyze and anticipate potential changes in the market factors that will impact your product demand, then costs aren’t the issue. They may contribute to the problem, but they aren’t the issue.
The Customer Is Right: Revenue
Do you have the product your customer wants to buy? Henry Ford is famously reputed to have said that “Any customer can have a car painted any color that he wants so long as it is black.” At the time this famous quote was allegedly uttered, the first major competitors began making inroads into Ford’s market share with car’s that customers wanted, and maybe they were in other colors, or simply other designs and alternatives.
The point is that customers ultimately decide the success of a company. They make the buying decisions. Cost structures impact profitability, and the market and customers set prices (what they are willing to pay). These are two parts of an equation that every industry has to deal with. Perhaps the latest auto bailout should have been reminiscent of the “chicken in every pot” idea from the 1928 Republican party “prosperity campaign,” and funded an “American Auto in Every Garage.” It probably would have been cheaper, more tangible, and definitely had more of a “stimulus” effect on the economy. Oh, and we could have picked our own models and colors … instead of everything coming in “budget deficit red.”
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