Wednesday, October 19, 2005

Where is Ross Perot Now that GM Needs Him?

A friend reminded me the other day of a time when GM might have avoided its now-imminent demise. In 1984, GM bought Ross Perot’s EDS, bringing Perot onto its board. Frequent quarreling with GM chairman Roger Smith over the company's leadership and culture led GM, at Smith's behest, to buy Perot’s stock for $700MM and force Perot to leave the board in 1986.

Perot was vocal about the poor quality of GM’s cars and its lack of decisiveness. How prophetic and right he was. I think it is fair to say that GM’s failure 20 years ago to heed his warnings marked possibly the last time it had a significant opportunity to avoid the fate that now awaits it - loss of independence and/or existence.

Lest you think that Lee Iacocca’s Chrysler experience demonstrates that a Big 3 automaker can save itself, let me remind you that it ultimately was acquired by Daimler-Benz. Iacocca didn’t save Chrysler, he merely delayed its day of reckoning by a decade or so. After his exit, the inertia of Chrysler’s Big 3 culture drove it once again to the brink of ruin, and forced it again to depend on the kindness of strangers.

I continue to believe that GM cannot save itself because its current leaders, beginning with Rick Waggoner, are products of the existing culture of 40+ years. It is not capable of creating lasting, profitable change for the long term, within two years, in how it designs, builds and markets vehicles. It may be acquired, or “merge,” to avoid an actual bankruptcy. But I still maintain that it will not be independent within two to three years from now.

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