Drawling with disbelief, H. Ross Perot, the feisty Texas entrepreneur who sold his computer services company to General Motors Corp. last year for $2.5 billion, recalled a recent phone conversation with GM Chairman Roger Smith.
Smith read a story that had just appeared in the Detroit newspapers claiming that Perot was being groomed to be the next chairman of General Motors.
"I said 'Roger, that's terrible -- 'cause we're like a law firm or an accounting firm. We just need to keep a low profile and support you guys.'
"He laughed and said 'I know that and you know that,' he says, 'but this is terrific.' And I said, 'No, Roger, it's bad.' He said, 'You're missing the whole point . . . . It'll shake a lot of guys up and we need to shake a lot of guys up.' "
The Smith/Perot combination is shaking up the world's largest car company by design as well as by rumor.
Barely a year since its purchase, Perot's Electronic Data Systems has become an integral part of General Motors. Perot says it is evolving into "GM's brain and nervous system" as the computer company continues to link the car company's vast global operations into an integrated data network.
EDS and its aggressive band of marketers are also GM's springboard into high-tech diversification. EDS personnel already are working closely with Hughes Aircraft Corp., the California-based high-tech engineering and manufacturing company that GM purchased last month for $5 billion. Dallas-based EDS is now intimately involved in GM's efforts to bring state-of-the-art factory automation into its plants.
But there's more to GM/EDS than state-of-the-art technology. EDS and Ross Perot are fast becoming symbols of a major change in corporate culture in GM. Perot's billion-dollar-a-year EDS is helping teach the $100-billion-a-year GM elephant how to dance.
Perot's style "fits right in with what we're trying to do at General Motors. We're trying to become more entrepreneurial," GM's Smith said.
The transfer of some 10,000 GM data-processing employes over to the more competitive culture of EDS caused some noticeable pain and anxiety. One doesn't just join EDS; one enlists -- and that's fine with Smith.
Smith said that Perot's style is just exactly what we want. What he's trying to promote is what we're trying to promote -- the new type of management philosophy of being more entrepreneural; pushing responsibility down to lower levels; getting people to take on more authority. That's what we need to get to where we want to be by the year 1990 in terms of our management."
Smith and Perot are the odd couple of American capitalism. Smith is the 30-year veteran of the Chrome Colossus; the ultimate corporate insider. Perot is a full-blooded entrepreneur who built his company from scratch and became a billionaire in the process. (Perot pays himself $67,000 a year. But he owns 45 percent of EDS, so his share of the GM purchase was worth more than $1 billion on paper).
Smith reluctantly performs all the public ceremonies required of Fortune 500 chairmen; the flamboyant Perot is given to broad sweeps and grand gestures. He recently purchased a copy of the Magna Carta for $1.5 million and donated it to the National Archives; his role in coordinating the rescue of EDS employes held captive in Iran led to a best-selling book "On Wings of Eagles."
The two of them probably will determine whether GM's future is shaped more by innovation than inertia.
Their relationship isn't exactly a friendship but it's not an ordinary business partnership. Smith, fundmentally a private person, speaks only in the broadest generalities.
"I like Ross, personally," he said. "I think he's an easy person to like."
Perot is a bit more open. "I, of course, know nearly everybody that runs the big companies in this country," he said. "A lot of them fit into a pretty standard mold. Many of them fit into a mold that is personally unattractive to me. Certainly the people I call the corporate gypsies . . . their vision of the future is 90 days.
"Now, suddenly, here we are with this nice, warm, friendly, informal guy who started at the bottom -- like everybody else in General Motors -- worked his way to the top; knows where all the bodies are buried. And he's like us. He knows his business.
"He has spent his career building one company, he is dedicated to that company . . . you know, Roger's a hard guy not to like just because Roger doesn't put on airs. Roger is Roger."
In a wide ranging, 2 1/2-hour interview in his colorful EDS office crammed with Remington bronzes, photos of his family and assorted memorabilia, Perot discussed his role at EDS, his company's relationship with General Motors and his own relationship with Roger Smith.
A short, trim man with sharp blue eyes, Perot is almost a Texas stereotype. He wrung howls of outrage throughout the football-loving state when his blue-ribbon educational commission successfully recommended that if high school athletes couldn't pass their classes, they shouldn't be able to play extramural sports.
Perot likes to reminisce about his childhood days breaking horses and how IBM turned down his proposal to create an EDS-like subsidiary. That refusal spurred Perot to launch his company with an initial $1,000.
He's held in high regard by the business community, inspires fierce devotion from his employes but has a reputation as someone who will sometimes let niggling details interfere with an appreciation of the larger picture.
Q. When did Mr. Smith give you a call?
A. First thing that happened is John Gutfreund [chairman] of Salomon Bros. called and said he wanted to see me . . . . He came down and told me that General Motors wanted to buy EDS. I was surprised, I was surprised that he'd even heard of us. And I couldn't figure out why they wanted to buy us. I was flattered that they were interested, but we had no interest in selling.
So then I talked to Mort EDS President Morton H. Meyerson , and he wasn't interested either, but you have to remember our background, see -- we have to work so hard to sell business. So wait a minute, these people have some need, we don't know what it is, but let's go talk to them. We'll figure out what it is, and we won't sell our company but we will sell them something.
So we went to Detroit and met all the top people at General Motors.
Q. And you met Mr. Smith?
A. Oh sure.
Q. What was your gut impression?
A. Well my first impression was that he was warm and friendly and I liked him and he wasn't pretentious.
Q. Was he what you imagined the guy running GM to be?
A. I, of course, know nearly everybody that runs the big companies in this country. A lot of them do fit into a pretty standard mold. Many of them fit into a mold to be personally unattractive to me. Certainly the people that I call the corporate gypsies, I have no use for at all, because they float from company to company, taking and not giving much. . . . I don't see them as company builders; I don't see them as people that have a great vision for the future. Their vision of the future is 90 days.
Now, suddenly here we are with this nice, warm, friendly, informal guy who started at the bottom, like everybody else in General Motors, worked his way to the top, knows where all the valves and switches are and knows where all the bodies are buried. And he's like us. He knows his business. He has spent his career building one company; he is dedicated to that company and, during the course of the day, you know Roger's a hard guy not to like just because Roger doesn't put on an airs. Roger is Roger.
Q. But you say, "You run a car company, what the heck do you want with EDS?"
A. Well, during the course of the day, you know, they showed us all around General Motors, and that's very impressive. We got to meet all the top people that day, and they were just versions of Roger.
I mean they were hard-working guys that came in at the bottom, worked their way up to the top. They were people who had a great vision for the future for General Motors. . . . So we liked them. Then, during the course of the day, we got a glimpse of how much we could help them. Now you have to keep in mind Mort and I -- we thought we'd done everything.
A. Well, EDS was generally considered to be the finest computer service company in the world. We built it from nothing. We had an incredible talented team of people that we had selected one at a time. We had the best won-lost record in the computer business against IBM. I mean nobody takes IBM to the mat as often as EDS. . . .
I've been in all the seas and oceans, I've been in all the ports, been through all the storms and I've seen it. Now along comes General Motors, and when we saw how much we could contribute to General Motors' future, we decided that there just wouldn't be any better use of our time for the rest of our careers. And there wouldn't be any better opportunity for EDS and all of the people in EDS, and that literally it gave EDS a new beginning.
But I told Roger at the end of the first day, "Roger, you don't have to buy a dairy to get milk. . . . We'll sell you service."
Q. And what did Roger say?
A. Well, it was too important, it was too critical. We [GM and EDS] were gonna build a worldwide communications network.
Q. Do you know what he wanted?
Q. Did he understand it?
A. Now, wait just a minute. Roger is, he's very detailed because of his financial background, and most people that are that detailed are not conceptual at all. But Roger is also very conceptual. At this point Roger was more conceptual, but he knew what his problem was. And he knew that we could fix his problem . . . .
Q. What do you think he thought his problem was?
A. Well, his problem is that they were way behind the curve in automation -- whether it goes traditional financial information or the factory floor. He didn't have the numbers of people that he needed or the management organization that he needed in order to accomplish what he wanted to do. . . . See, my perceptions of General Motors are kind of interesting because I'm just kind of like an immigrant that got off the boat, wandered through New York City and has first impressions.
Okay. General Motors had its EDP [electronic data processing] departments broken up and split up in the organization. There was no single EDP organization, it was just a bunch of little cottage industries. Now Roger could stand up some morning and say "by golly this is the wrong organization," and he'd pull all this together into a single unit. . . . And the elephant might not even bat its eye.
Now this is my reading -- and I've never even discussed this with Roger -- but I think Roger has figured out how to trick you all. And buying EDS was part of tricking you all. See, in one fell swoop he can move all those little pieces over into EDS and suddenly he had a single EDP organization. . . .
Q. So Smith wanted to create a worldwide network. Did GM want to go into telecommunications?
A. No, they needed it for their own business. We had a huge network of our own. The two together are the largest communications network in the world and the only true state-of-the art network because it's not evolutionary. It's going to be all new.
Q. And it's going to be marketed to other corporations?
A. Yes. . . . When we get the green light from General Motors, we'll take their manufacturing, the artificial intelligence knowhow, robot knowhow and on and on . . . and take that into the marketplace . . . .
Q. I'm trying to get a sense from you on the extent to which Mr. Smith has the technical as well as the conceptual understanding?
A. Let me tell you, see, I watched Roger for a few months, and I said, "Now, this is an interesting guy." And I said "what makes Roger Roger?" Well, first off, you've got to go into Roger's past. . . . Roger's father was a very successful businessman and an entrepreneur . . . so the seeds are there.
Now Roger is an automobile guy [and] all over the automobile industry, there are people who are frightened of electronics. . . . so why is he fascinated with this?
As a young enlisted man in World War II in the Navy, he was an electronics technician. See, before he learned to be afraid of it, he learned to understand it. . . .
Then you say, "O.K., here's a guy that came up crunching numbers [Smith worked his way up through GM's financial staff]. Where does the leadership come from?
He was on [Admiral] Arleigh Burke's flagship -- a legendary character in World War II . . . A guy that sailors would walk off the edge of a cliff for. He was not a remote, distant figure. He was a guy down there. Arleigh would stand around and talk with the sailors on a very direct and personal basis. You watch Roger, he does the same thing. I think Arleigh Burke had an enormous impact on Roger's leadership style. . . .
Q. What do you think Smith's weakness as a manager is?
A. He works too hard. . . . I've said the same thing to Roger -- there are not three or four Roger Smiths in General Motors. He's got all these creative plans in mid-flight. The last thing we need to do is lose the quarterback in the middle of the game. . . .
Now let's talk about competition, because General Motors and the entire American automobile industry had a big respite from competition.
Detroit was the automobile capital of the world. They owned bat, ball, gloves, both teams, the stadium and the lights. It's hard to lose, right? Now, it got so bad that they tried to get divisions to compete with one another -- Chevrolet compete with Pontiac, Oldsmobile with Buick, and so on and so forth.
Now we've got a whole generation of people who think that's what competition is. And I don't like that, and I say "Fellows, that's intramural sports." I said "you don't even tackle there, you just touch the guy. Now you don't even play with pads. I say you're playing in your old shorts. Now the Japanese have showed up, and they're competing professionally. We've got to compete professionally with them."
Q. What the heck does a Roger Smith or a GM guy who spent his entire life with the company say when you tell him they never had any competition?
A. Oh, Roger knows that. Roger knows that.
Q. What does the board of directors say when you say something like that?
A. Well interestingly enough, I said that. And they laughed. Because that's true, I mean it's just true. You're stuck with it. First board meeting I attended, they asked me, you know, to talk about EDS a little bit. I told 'em, I gave 'em my immigrant's view of General Motors. And I said "you don't understand competition. . . ."
I disagree with Roger in front of other people. And Roger likes it. I disagree with Roger in front of the board, and Roger likes it. I'll be the only board member to vote against something, and Roger actually likes it. . . .
Roger welcomes dissent. Roger is interested in one thing: Roger is interested in winning. And Roger, I don't think, ever feels for a moment that he's got all the answers. But he is looking for all the answers, and anybody who can help him get the answers, he's willing to talk to him