Many of the things people criticize General Motors for today are things it’s always been criticized for: it is insular, bureaucratic, thinks the world begins at Lake Michigan and ends at Lake Erie, enthralled by its own glory days and can’t make the hard calls needed to keep a business afloat. So what happens when a self-made billionaire from Texas with a giant ego and zero patience for bullshit shows up with a controlling stake at a company like GM?
H. Ross Perot, the man who did exactly that, died today at age 89 from leukemia, according to a family spokesperson.
Perot may well end up being most remembered for his unsuccessful third-party presidential run in 1992 (though he ended up with nearly 20 percent of the vote, making him one of the most successful independent candidates in recent history) and his even less successful run for the same office in 1996. But he was quite a bit more interesting than a couple of offbeat presidential runs, and as GM’s biggest shareholder and board member for a time in the 1980s, he openly and brazenly challenged a corporate culture in need of shaking up.
As with his unsuccessful forays into politics, Perot’s tenure at GM was notable for his outsider nature. Born in Texarkana, Texas, Perot attended the U.S. Naval Academy and spent about a decade in that service before leaving to become a salesman for IBM.
A few short years later, and out of frustration with IBM’s own glacial pace and risk-averse culture, he founded a company called Electronic Data Systems, an early pioneer of computer networking systems.
It struggled at first, but it turned into a debt-free multimillion dollar company by the 1970s, and one that made Perot and many of his employees into millionaires. He was known for being a teetotaler, for his strict code of conduct for his workers (“conservative suits and short hair for the men, no slacks for women unless it was freezing. And no marital infidelities,” as the New York Times put it today), for his hard-charging nature and also his commitment to philanthropy and public education.
(This doesn’t have anything to do with GM, but I think no Perot story is complete unless you mention how he gathered and trained a team of EDS employees with military experience for a “commando raid” on an Iranian prison on the eve of the Islamic Revolution to free, by force, two imprisoned company executives. The myth of that daring rescue doesn’t quite match up with what really happened, but it’s completely insane to think about and probably more than most bosses would do for their workers. Can you imagine Jeff Bezos or Tim Cook doing that? Get outta here.)
It was EDS that brought Perot into GM’s orbit. GM fully acquired the Dallas-based company for $2.55 billion in 1984 in an attempt to, among other things, integrate all of its previously un-networked computer systems. This made Perot a billionaire, put him on the GM board and made him the company’s biggest single shareholder.
It also put him on a now-famous collision course with the automaker’s chairman, Roger Smith, a figure as archetypal as a GM Company Man could possibly get.
Smith became chairman in 1981 after four decades with the company, and oversaw an especially dark time in its history marked by rapidly declining market share, increased foreign competition, myriad quality problems and an increasingly bloated organizational structure that all but assured massive, seemingly unstoppable institutional inertia. By 1984, a Smith-led reorganization was underway that had disastrous results as well.
At least in theory, Smith was drawn to Perot’s entrepreneurial spirit, and he envisioned EDS as helping to modernize and streamline what GM did. That’s not what actually happened.
This 1989 New York Times Magazine story has a great summary of the culture clash between Perot and Smith (and Smith’s loyalists, themselves GM lifers) that ensued. Part of the problem was lingering questions over EDS’ autonomy within the company:
From the first, confusion reigned. Perot insisted on independence for E.D.S.; Smith demanded fealty to G.M. Perot’s scrappy, entrepreneurial vigor - so attractive to Smith from a distance - clashed with the G.M. bureaucracy.
The opposing styles quickly created dissension among the rank and file. It didn’t help that G.M. workers knew little about the merger in advance. Virtually overnight, E.D.S. employees became G.M. employees, while G.M.’s computer technicians found themselves suddenly reporting to E.D.S. managers. Tempers flared. Before long, Perot and Smith were clashing over basic elements of their agreement, such as employees’ pay. Perot thought he should decide E.D.S. salaries, but Smith claimed the amounts were too high compared with General Motors’ payment structure. In one case, he complained, a senior E.D.S. executive was drawing a higher salary than he was as chairman of G.M.
To make matters worse, at least for GM, Perot wasn’t afraid to criticize the automaker openly and publicly—something that just wasn’t done at The General. He came from a move-fast, get-shit-done, no-nonsense business culture, and GM stood in stark opposition to that mentality. Here’s a famous quote he gave in several different forms in the 1980s, this one recounted by Fortune:
It’s like a blanket of fog that keeps these people from doing what they know needs to be done. I come from an environment where, if you see a snake, you kill it. At GM, if you see a snake, the first thing you do is go hire a consultant on snakes. Then you get a committee on snakes, and then you discuss it for a couple of years. The most likely course of action is—nothing. You figure, the snake hasn’t bitten anybody yet, so you just let him crawl around on the factory floor. We need to build an environment where the first guy who sees the snake kills it.
Or this one, in his New York Times obituary today:
“Revitalizing G.M. is like teaching an elephant to tap dance,” Mr. Perot said. He also said: “It takes five years to design a new car in this country. Heck, we won World War II in four years.”
The man loved animal metaphors, I guess.
Smith, on the other hand, never wanted to discuss GM’s problems or its internal disputes publicly, so he maintained that he and Perot only had minor differences of opinion to outsiders. That had its limits, though, as the two continually clashed over everything from acquisitions to plant operations. Perot was also critical over lavish executive perks at GM as the automaker lost money and market share.
Here’s the Times Magazine again, a 1989 story that recounts the battle between the two men:
ROSS PEROT’S CRITICISMS of G.M. were lent a certain edge by the auto maker’s grim financial performance in late 1986. In the midst of one of the most robust car and truck markets in American history, it reported a third-quarter operating loss.
Wall Street analysts were somewhat heartened to learn that G.M. planned to close all or part of 11 North American factories.
To Perot, however, the plant closings - putting nearly 30,000 people, about 5 percent of G.M.’s employees, out of work - represented the tactics of disinvestment and retreat. In an interview with Ward’s Auto World, a trade publication in Detroit, he called openly for an end to ‘’the G.M. system.’’
This all came to a head in late 1986, when Smith and GM’s board simply had enough and spent $750 million—about $1.7 billion today—to buy out Perot and all of his stock to get him off the board. He called the move “morally wrong,” and as Automotive News noted at the time, “GM could have used the $375 million (half the payout) to keep 10,000 line workers on payroll for another year, develop its vehicles and even pay its top 1,500 executives for all of 1986.”
It’s true that Perot wasn’t a “car guy” in any real sense. Reportedly, he was at first ambivalent about GM’s acquisition of EDS. But as a businessman who built an empire up from just $1,000, he understood things like product quality, customer service, not having Cadillacs that looked exactly like Chevrolets, and taking a kind of big-picture approach to things. Perot famously fumed about how bad things were at GM in this 1988 Fortune article, named after his “blanket of fog” quote:
Dealers started contacting me. I met with the top 20 Cadillac dealers one morning in Dallas. They were as mad as hornets. I said, ‘’Okay, guys, what are you mad about?’’ They just went through the list of everything they thought was wrong. They felt that their dealerships’ existence was threatened because their cars were that bad. They said a Cadillac needs to look different from a Chevrolet or it’s kind of tough to sell. A Cadillac needs not to come back every few days with a transmission problem, an engine problem.
When you step on the accelerator, a Cadillac needs to move. Your trunk needs to be big enough to put a thermos jug in. You don’t need oil puddles under any car — and you damn sure don’t need them under a Cadillac. The gaskets are bad.
As a result of that meeting, I went out and talked to Cadillac mechanics. I said, ‘’What’s going on with those gaskets? What happens when you fix them?’’ They said, ‘’Well, we put a new gasket in, and they leak again.’’
I went to an independent mechanic, a high school graduate, and asked, ‘’Do you have a lot of General Motors cars coming in here with bad gaskets?’’ He says, ‘’All the time, Ross.’’ I said, ‘’Can you fix them?’’ ‘’Yep.’’ I said, ‘’Do they come back?’’ ‘’Nope.’’ I said, ‘’How do you fix them?’’ He winked at me and says, ‘’Come back here.’’
He had all the General Motors gaskets. Then he had a good piece of gasket material, and he would lay the GM gaskets there and draw a picture with a pencil. Then he would take an X-Acto knife and cut out a good gasket from the gasket material, and he’d put that on the car. He says, ‘’They don’t ever come back.’’
He said, ‘’Ross, the problem is, some accountant at General Motors is probably saving 3 cents a gasket.’’
In the same story he was sharply critical of GM managers living high on the hog and getting massive bonuses even as they bled cash, and of the culture of needless waste that served the people at the top above the workers who actually built the cars.
“I took the position that anybody who needed a chauffeur to drive him to work was probably too old to be on the payroll, and that anybody in a car company ought to be driving his own car because you didn’t get much of a feel in the back seat,” he said.
Perot fared fine after getting ousted from GM, because after all, he was rich. He started his own company, Perot Systems, in 1988, and raided the executive ranks of EDS to staff it. That company was acquired by Dell in 2009.
When politics didn’t pan out he returned to Texas and focused on his philanthropic endeavors for veterans, students and more. And today, as the world reflects on his life, his campaigns draw some comparisons to that of Donald Trump: a fiery outsider businessman who opposed NAFTA and other trade deals, and favored tariffs to force trade parity in America’s favor. (Though Perot had more success, brains, money and did more actual philanthropy than our current president ever did.)
If nothing else, Perot was ahead of the curve in calling out GM’s problems—problems that came to a head two decades later when the automaker collapsed into bankruptcy. Without question, GM is in much better shape these days, superior on quality and more apt to make those hard calls, like shedding unprofitable models or even brands like Opel. That would’ve been unfathomable when Smith and Perot were duking it out in the ’80s. At the same time, despite being profitable, GM’s trimmed white-collar jobs and shipped production to Mexico as it’s cut at home. I feel like that’s something Perot would’ve had a hard time stomaching.
I don’t think anyone is qualified to say that GM would have avoided its mid-2000s fate had it listened to Perot, but he was probably right about snakes—and gaskets.