High Noon at G. M.

General motors chairman Roger B. Smith once lost his composure over a raw egg. He witnessed a demonstration of a new touch-sensitive robot, which picked up an egg with its mechanical fingers and handed it to him without cracking the brittle shell. The chairman became almost giddy with excitement and for days waxed eloquent to anyone who would listen about the technological miracle. The egg clearly held the embryo of Smith's corporate rebirth.

Smith, the accountant who had never been a plant manager or been directly involved in the development of a single product of any kind, concluded that G.M.'s answer to world competition should be deus ex machina--salvation through the machine. Only his machine would have artificial intelligence and articulated mechanical hands.

Smith's quiet scenario--his "final solution"--was to eliminate the vast majority of the workers and to become competitive almost exclusively through computer-based automation. His mandate was to replace people--who, after all, were not very productive, had bad attitudes and often belonged to belligerent unions--with intelligent machines. "Every time you ask for another dollar in wages," he told the U.A.W., "a thousand more robots start looking more practical."

The human side of the equation has always eluded Roger Smith, whom a Detroit News reporter once aptly described as "brilliance unimpeded by humanity." To illustrate that point, I offer an example of an encounter I had with him at a press conference in December 1986, more than a year after I had joined G.M. as a speechwriter.

"Call me Roger," he had said in his squeaky voice, extending his hand.

I was astonished, not that the most powerful industrialist in the world would speak to me but that he obviously did not know who I was--even though I had written the speech he would soon deliver, even though I'd attended many meetings where he had been present, even though I had shared a corporate jet with him for thousands of miles. So here I was, holding his hand, wondering how I might tell him diplomatically that I was on his staff.

"Roger, I've checked the microphone height, and I have an extra copy of your speech here if you need it." His near-albino skin flushed and he dropped my hand as if it contained a joy buzzer. He was off to meet people who mattered.

Perhaps I shouldn't have been surprised. After all, Smith had more important things to do than to remember what his speechwriter looked like. The power of his position is awe-inspiring. General Motors is the largest corporation in the world, holding more assets than all but two dozen of the largest nations of the world. One out of every five cars on the planet was built by General Motors, and so was the only car parked on the surface of the moon. In addition to more than 750,000 direct employees, there are 500,000 dealership people and 1,500,000 or so supplier employees who owe their livelihoods to "Mother Motors." In a good year, its revenues exceed 100 billion dollars. As chairman of the board and chief executive officer of all that, Smith might not be expected to remember who had written the speech he was about to deliver.

(continued on, page 94) High Noon at G.M. (continued from page 86)

In the office, Smith is so rushed that he occasionally leaves out words or misspells obvious ones, such as spelling sure "shur." When he removes his glasses--a nervous habit--holding eye contact is nearly impossible, as he has a weak eye that wanders, which is oddly appropriate, since the windows to this man's soul always seem to be open to more than one horizon.

The endless string of actions and pronouncements during his long tenure at the top has given him the image among hourly and salaried ranks alike as being insensitive. He has made such amazing public-relations blunders as giving himself and his top executives massive bonuses at the same time that he canceled profit sharing and sharply cut merit pay and demanded that the rest of his employees make major concessions to keep their jobs. Even one of his most loyal associates says, "If Roger had purposely set out to destroy all morale in what once was the most confident and secure company going, he couldn't have done a better job."

Now, it may seem that it should not matter how one businessman relates to people. In another time and place, the man's persona might simply be accepted as nonfunctional secondary success characteristics. Not now. Not at General Motors. For never has a man so needed the ability to motivate people to great heights.

The chairman's task is daunting. He is attempting to create a new kind of corporation in the Eighties (which coincides with his ten years as chief executive). His quest, which is truly visionary, is to establish what he calls "the world's first 21st Century corporation"--the first all-electronic manufacturing corporation with a high-tech elite, paperless processes and peopleless plants. Smith has committed nearly 80 billion dollars--more than the assets of any other Fortune 100 company--for high-technology equipment and acquisitions of or investments in computer and electronic talent trusts. Nothing in the once most stable, if not staid, of all corporations will escape his redirection.

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By 1984, Smith felt that his dream was in trouble, and not only because of Japanese competition. G.M. had just come through a difficult reorganization, its car lines were under increasing accusations of uniformity, and the unions were heating up over profit sharing and job security. Perhaps most important to the chairman himself, his planned thrust into the 21st Century was in jeopardy because of G.M.'s still-decentralized computer operations.

The computer was to be the heart of Smith's plans. G.M. had more computer power than any organization short of the U.S. Government. Yet there was no centralized control. Smith saw a way of getting the act together in one decisive move. He'd simply buy an outside computer-services company and hand over all G.M. computer business and people. Smith needed a company such as Ross Perot's Electronic Data Systems. And not just the company but Perot himself.

"Perot's style fits right in with what we're trying to do at General Motors," Smith said. "E.D.S. has the kind of entrepreneurial spirit that we need to develop in G.M."

Smith thought he needed Perot, yet from the time they met, it was obvious that the need was not mutual. Perot, at 53, had created a corporate culture and a public persona that gave him more than he had ever wanted. "I had no interest at all in selling my company," Perot said. "I had $100,000,000 in cash and 46 percent of E.D.S. stock [worth more than a billion dollars then]. E.D.S. was growing at 20 percent and more a year. Why did I need them?" He might also have added that, by 1984, Ross Perot was already being heralded as "the greatest Texan since Sam Houston," and groups were forming to urge him to run for President of the United States. What could Smith possibly offer?

Moreover, what could he actually buy? E.D.S. was more of a personality cult than a company. This cult centered on a man of legendary accomplishment and compassion. Perot likes to call the stories about himself half myths, yet even without embellishment, he had accomplished more before he met Smith than most men could in several lifetimes. The former IBM salesman had invested $1000 to start Electronic Data Systems, a computer-services company that, within 20 years, made him one of the wealthiest men in America. When a reporter asked him if he preferred being referred to as a billionaire or a millionaire, he snapped back, "Call me Ross."

By the time he met Smith, Perot had lost interest in the day-to-day running of E.D.S., turning it over to his close friend and E.D.S. president Mort Meyerson. Perot had no patience with anything less than grand and heroic themes. He devoted himself to causes. Over the years, his charitable acts have been so numerous, in fact, that he has given away more money than Smith can possibly earn during his ten years as G.M.'s chairman.

Perot's causes are legendary. ("Not legend," Perot says, "myths.") A few involve just money, such as $15,000,000 for a rare-book collection donated to the University of Texas, $1,000,000 to the boy scouts and $10,000,000 to build a new symphony-orchestra hall in Dallas and insist it be named for his friend Meyerson.

But none of Perot's philanthropies involve his personally doing what he seems best at--taking on challenges that would stifle Saint Jude. Trying to bring back the prisoners of war still missing in Vietnam has been one of his crusades since 1969, when he spent $2,000,000 to fly two planeloads of Christmas presents to Hanoi. Perot didn't get his items through to the POWs, but he focused world attention by standing in front of the North Vietnamese embassy, protesting with a bullhorn in hand. He has financed more than 20 expeditions to free POWs since then and has spent countless millions more--including $1,000,000 on newspaper ads alone--just to draw attention to the cause. And, most recently, it was revealed that Perot had put up $2,000,000 to pay for the release of hostages in Lebanon.

Perot tackled the entire Texas school system, spending $2,000,000 and hiring the state's best lobbyists so the other side couldn't retain them. His goal was to make basic education, not sports, the priority in Texas high schools. He would not budge an inch on the legislation he wanted--it had to be "no pass, no play" or nothing.

But by far, the most publicized Perot venture was the putting together of a commando force of E.D.S. employees with military experience that rescued two executives from an Iranian prison. The effort became the subject of a best-selling book, On Wings of Eagles, by novelist Ken Follett. Some 26,900,000 Americans watched an enactment of his daring exploit in a television miniseries.

In crusade after crusade, Perot has shown that once he defines a goal, he goes after it tenaciously, even if it is as seemingly unresolvable as the POW challenge. In trying to explain why he had offered Oliver North $2,000,000 in cash for a hostage deal on the strength of a three-A.M. phone call, Perot said, "What would you do if you were sitting on a pile of money that didn't mean much to you and you got a chance to help some Americans?"

Never deviating from his own standards, Perot defined exactly what his company would be like while the entire staff was still small enough to fit around (continued on page 148) High Noon at G.M. (continued from page 94) the kitchen table. He set everything down in a code of standards, which defined precisely how the E.D.S. employee would look, act and feel. In case the rules missed something, there was the all-purpose ethical code, which said, "Your character, integrity and behavior, both on and off the job, determine the image of E.D.S. in the community. Therefore, your standards of conduct must, at all times, be above reproach."

Perot attacked massive jobs by putting his people in what looked like SWAT teams. One of their jobs, for example, was to set up the software for an entire state Medicare system. They laid out bunks at the job site before Thanksgiving and did not come out until Christmas, when they had the system designed. Success came rapidly. Within 20 years, E.D.S. served more than 3200 customers in 50 states and foreign countries.

Perot had no intention of giving up all that when he was contacted by a New York agent and told that General Motors wanted to buy his company. But as a good businessman, he figured that he and Meyerson should talk with them, anyway--there, could be a massive contract in it for E.D.S. When Perot and his people got to Detroit, Smith took them on a whirlwind tour, flying one of the company helicopters over a number of component and assembly plants and attempting to show the Texans the scope of G.M. with world maps and film clips. "The sun never sets on General Motors," Perot said, obviously impressed.

As he left Detroit, Perot was convinced that G.M. would be a customer rather than his company's buyer. "You don't have to buy a dairy to get milk. We'll sell you service," Perot told Smith. They parted with Smith promising to make an offer and Perot still thinking service contract.

It was the bankers at Salomon Brothers, from all reports, who came up with a way of making a deal that would be impossible to refuse. Perot would join the G.M. board and pick up one billion dollars in cash and 43 percent of a G.M. stock offering created specially for the deal. The shares, called Class E common stock, would bring E.D.S. under the G.M. umbrella, but the stock would remain independent and would be traded at a price based on E.D.S.' performance--not the auto maker's. Perot was also promised that he would retain managerial control of his company. E.D.S. would be handed at least 2.6 billion dollars in new business--about three times E.D.S.' 1984 earnings.

Perhaps most important, Perot would be challenged personally to help save Detroit. "It was the opportunity to save millions of American jobs," said Perot. "It was too exciting to pass up."

The deal was signed on June 27, 1984, Perot's 54th birthday, which was also the 22nd anniversary of the founding of E.D.S. Smith didn't attend Perot's birthday party, but he certainly provided the cake.

Once Perot signed on, Smith wasted no time announcing that E.D.S. would assume responsibility for every piece of computer hardware and software and that 10,000 G.M. computer people (7000 in the United States) would be transferred immediately from General Motors to E.D.S. An advance guard of 650 E.D.S. people would come to Detroit to secure the beachhead.

As usual, most of the 10,000 G.M. transferees learned about the acquisition from the newspapers. They read that E.D.S. had much lower pay rates, few benefits and no retirement program. All of the articles about E.D.S.' storm troopers, Army-boot-camp operating standards, dress codes and ethics statements devastated morale among the G.M. transferees. The fear grew, and any significant development entailing computers screeched to a near stop.

In the midst of the confusion, E.D.S. began recruiting in Detroit. The company would quickly hire some 5000 additional people, many of whom had no professional computer experience whatever. High school business teachers, who perhaps had taught a class using a personal computer, were hired to jump headlong into massive mainframe programs. Ads promised the newcomers that "together we will cross thresholds of countless breakthroughs."

In the meantime, E.D.S. hiring became a Detroit joke--" How many E.D.S.ers does it take to change a light bulb?"

"No one knows, because they're not done hiring yet."

Smith sold Perot on the competitive problem as an open challenge for him to launch a personal crusade. Perot quickly went into action. He placed a Norman Rockwell painting in his outer office. It was War Stories, in which a Marine has returned from World War Two and tells his friends about the victories. "I put that there for my G.M. visitors," Perot said. "It's to remind them that we used to whip the Japanese right regularly, and if we ever decide we want to do it again in the car business, we can."

At his first G.M. board of directors meeting, Perot declared that he was going to be the spokesman for the employees, the dealers and the customers. And of E.D.S.' arrival, he said, "We are bringing G.M. from a mature company to a young, exciting company.... We will be the brains and nervous system of General Motors."

Perot went around visiting dealerships in "Saturday clothes" to see about service firsthand and to "get to know the guys in the trenches." Unannounced, he visited a G.M. plant in Arlington, Texas. That shook up the G.M. central office, which was on the phone to the plant every 15 minutes during the visit, asking, "What's he doing now?" Perot was, in fact, having lunch with the workers on the factory floor.

As Perot saw it, his task was to be the gadfly. His open criticism of G.M. was, at first, a direct reflection of Smith's own largely unarticulated feelings. He said that before the Japanese invasion, the only competition at G.M. was that among rival divisions within the company. "Fellows, that's intramural sports," Perot said. "You don't even tackle there; you just touch the guy. Now the Japanese have shown us they're competing professionally. We've got to compete professionally with them."

Still, all was not well. It came as a shock to Perot and E.D.S. that "hands off" did not mean what Smith had originally said. The first indication that he wanted to renege on his deal and direct E.D.S. operations from Detroit came over the issue of E.D.S. executive stock benefits.

"Roger came down to Dallas and tried to get the board to change our compensation," Perot said. "He didn't like the fact that a lot of E.D.S.ers could make more money than he could through stock."

Other E.D.S.ers in that meeting were surprised by Smith's insistence and stunned when he had a temper tantrum. "His face turned beet red," an E.D.S.er said, "and he started foaming at the mouth. It was unbelievable."

Perot said of the incident, "I took Roger aside and told him he couldn't be chairman if he was going to act like that." Perot did not back off on his compensation system, reminded Smith of their deal and sent him home.

From then on, Perot said, "there was a continuous stream of trivia." G.M. auditors and personnel people visited Dallas frequently. "If a guy comes down and just wants us to fill out forms, then we don't do it," he said. "We give him a hot meal, pat him on the back and say, 'No! We're not going to do this,' and that's it." Perot interpreted Smith's promise of noninterference to mean exactly that--independence.

Smith, as you would expect, was surprised that E.D.S. didn't blend into G.M. policies and procedures. "Independence does not mean indifference," he said. The issue of G.M. auditors became central. E.D.S. had its own independent auditors, and Perot refused to let the G.M. teams in the door. This went on for more than a year, until Perot finally relented, but not without acquiring the worst epithet anyone could receive in G.M.-- "He's not a team player."

"Sure, he finally gave in on the auditors," Smith told me, "but what would it be next?"

Publicly, Perot and Smith continued to say pleasant things about each other for the first turbulent year, but the relationship was rapidly deteriorating. Elmer Johnson, G.M. vice-president and corporate counsel, said that Perot's dislike for Smith began to surface within six months of the E.D.S. purchase. That was the period in which Perot was steadily losing faith in G.M.'s sincerity, watching his own people become casualties in the struggle to change the giant, while thousands of people who were not of the E.D.S. culture were being forced into its ranks.

Yet there was little at the time that he could do about it. The frustration Perot must have experienced during that first year was not unlike that of those caught in the chaos within G.M. Perot, however, was too much of a fighter to acquiesce. "A team player at G.M. is one who will march over the cliff," he said. "Not me."

In May 1986, Perot sent a letter to Smith that contained an ultimatum. Things had to change. Perot gave Smith four choices. First, he proposed, they could begin to work together in good faith, but there had to be a written agreement of how that was to be managed. Second, Perot was no longer willing to compromise on the original agreement. Either G.M. lived up to it or they must take it to the board. Third, Smith could try to terminate him, but with the understanding of the length and severity of the fight ahead. Fourth, Smith could buy him out, but, Perot emphasized in the letter, "in my judgment, this would be a serious mistake for General Motors."

Smith had sent his attorney, and when nothing came of the meeting, the assumption was that the crisis was over. Yet even a cursory knowledge of Perot's background should have told Smith that more, and worse, was to come. Here was a man who had proved he was fiercely loyal to his E.D.S.ers, a man who saw money only as a means to greater ends and whose tenacity was proved on the grandest scale. Perot could not sell out at the time, because the best he could have done was to cut a deal to save himself. That wasn't good enough.

Perot denies having stayed to develop a rescue plan for his people, nor will he admit to having planned any tactics. Yet, conscious or not, the strategic genius of his moves is self-evident.

During that time, the Texas gadfly was buzzing freely around the company. He visited plants, development labs, styling studios, test tracks and accounting offices. And he used his down-home charm to encourage people to speak their minds. "I've been with G.M. for 24 years," an Arlington, Texas, plant employee said, "and I've seen mostly arrogance from executives. Ross is a real change."

Perot revealed his natural affinity with the working people, living, as he did, closer to their lifestyle than to that of G.M.'s executives. He refused to accept a free company car and instead traded in his 1979 Chevy for a new Oldsmobile, bargaining over price at the dealership like everyone else.

And Perot was in regular contact with his E.D.S.ers, who were operating--or attempting to--in every plant and office in the corporation. With his ability to put people at ease and get them to talk freely, he gained a thorough overview of the corporation and an appreciation for the tremendous frustration so many felt.

After all attempts--including two reorganizations of the G.M.-E.D.S. crew--failed to resolve the E.D.S. contractual problems, Perot stepped up his public attacks. "You want to know how to teach an elephant to tap-dance?" he asked. "You find the soft spots and start poking." In late July, Perot got out his prod.

In an interview with The Wall Street Journal, and on several less formal occasions, he made thinly veiled attacks on Smith's spending spree:

"We are spending billions to develop new cars. This isn't a moon shot; it's just a car."

"Brains and wits will beat capital all the time."

"Our solution is to go out and buy new uniforms. The team looks good, but it still can't play."

And he jabbed at Smith's tendency to blame the workers: "G.M. has failed to tap the potential of its people. In America, we tend to blame the workers, but the workers don't design the cars, or sell them, or set up the standards. American workers are the salt of the earth, and they could beat anyone if they were given half a chance."

Perot's outbursts started the press speculating that he was campaigning for Smith's job. Smith had let such rumors persist back when the chair was not a hot seat, but now that he was under criticism from Wall Street and the media, the press speculation became a personal threat. Still, he made it clear that no one was to confront Perot.

"He's impatient," Smith said, "but he's impatient for the same things we are." Later, someone said that Smith was practicing "good-dog diplomacy"--saying "Good dog" publicly while he was looking for a stick with which to beat Perot. That was simply not the case. As unbelievable as it may seem, Smith continued to admire the Texas folk hero and throw flowers at him, even while Perot was hurling bricks in his direction.

Smith's admiration was mixed with a degree of fear. "I don't want to antagonize him," he told those who urged him to fight back. President Lyndon Johnson had had a similar problem with J. Edgar Hoover. When someone asked Johnson why he didn't fire Hoover, he said, "I'd rather have him on the inside of the tent pissing out than on the outside of the tent pissing in."

The pissing match soon turned into a torrent of bad publicity for G.M. In two major interviews with Ward's Auto World and Business Week, and in several other talks, Perot hit G.M. hard:

"The first E.D.S.er to see a snake kills it. At G.M., first thing you do is organize a committee on snakes. Then you bring in a consultant who knows a lot about snakes.... Then you talk about it for a year."

"This place cries out for engineers with greasy hands who know how to make cars to be making the policy and motivating every member of the G.M. team."

"It costs $140,000 a year to heat one [executive] parking garage. I'd shut that thing down; it has nothing to do with making cars."

Smith's sense of humor was straining, but he kept up the supportive front initially. He said, "The other day, I was talking to Ross, and he was saying, 'I have to make a speech or something to tell everyone I don't want the chairmanship.' And I said, 'Well, Ross, I don't know if we need another speech.'"

Perot probed deeper. "Just a trip to the 14th [the executive] floor is depressing. Get rid of the 14th floor. Get rid of the private dining rooms and chauffeured limos and heated garages. Get rid of everything that separates people."

Perot laughs about the reaction when he finally hit the sensitive spot. "They went nuts when I criticized their chauffeurs and executive dining rooms," he said.

Although his popularity was low on the 14th floor, Perot was fast becoming a folk hero to the rest of the company. He was saying publicly what G.M. employees were telling one another privately. In Perot, they were hearing direct feedback of their comments to him, and they were delighted that their ideas were finally being aired.

Perot's rapport with the G.M. rank and file was a disastrous threat to Smith's faltering leadership. The appearance of unanimity on the 14th floor had always been sacrosanct. Conflict meant a lack of control, something Smith was not in a position to endure. With Wall Street already questioning his ability to get things done, he was beginning to understand the broader implications of Perot's thrust.

While the verbal jousting was gaining center stage, Perot found two other spots into which to drive barbs. First, Smith had decided that the corporation was not going to pay profit sharing for 1986, yet he would insist that his executives receive their bonuses. There was already a great deal of controversy on the 14th floor over that issue. The more people-sensitive executives urged that Smith forget the bonuses or approve a symbolic executive pay cut of, say, ten percent, to let the employees know they were sharing in the company's misfortunes. Smith insisted on the bonuses and knew he could easily get the board to approve them on December first.

Perot, however, was certain to vocally oppose the move. He was already hinting in that direction with statements such as: "In a war, you feed the troops, then you feed the officers, because the troops fight and the officers plan.... It's hard to fight while you're hungry." Perot would certainly be an embarrassment on the bonus issue.

There was another soft spot that Smith needed to protect. This was the one year in which he could not afford to have an inside critic exposing G.M.'s machinations. For he had painted G.M. into a financial corner with his spending and was unable to get the organization to make cuts fast and deep enough. The third-quarter losses were much worse than most suspected. David Healy of Drexel Burnham Lambert, a respected New York research firm, concluded that G.M. was playing with numbers. In a report titled "The Case of the Missing Thirteen Billion Dollars," Healy wrote, "Our suspicion is that the company inflated its third-quarter operating profit to avoid reporting a net loss for the period and 'paid back' the borrowed earnings in the fourth quarter." That, however, was not the brightest of ideas, since the fourth quarter was a disaster. G.M. unit sales dropped, while Ford sales increased. By the end of November, when the E.D.S. buy-out came up, G.M. was down to a paltry 33.8-percent market share--the lowest in 50 years.

The worst, however, was yet to come. For Smith had done what seemed to be the impossible. G.M. would pass the 100-billion-dollar revenue mark in 1986 yet actually make no money. Smith did post a net income of 2.945 billion dollars for the year, but that was largely the result of some extremely innovative accounting. "G.M. seems to have reached something of an accounting high-water mark," Healy wrote, "by claiming an apparent four-billion-dollar total U.S. loss on its tax return and simultaneously showing an $87,000,000 pretax U.S. profit in its stockholder report."

In looking at Smith's situation in late November of 1986, it was obvious that he would have agreed to any terms to get the loose cannon off his deck. Each time Perot spoke out against G.M., you could hear G.M. and E.D.S. stock click down another notch. Gershon Kekst, a New York PR guru who specializes in take-over battles, warned Smith about the possibility of a hostile assault on G.M. and said that Perot was one of the few people with the currency and the clout to pull it off.

Even if Perot didn't want his company, Smith must have sensed that his survival as chairman depended on giving Wall Street some good news. He somehow had to make the most embarrassing year in G.M. corporate history look good. That kind of creative reporting would not be possible with the vocal Mr. Perot shouting the truth from the deck.

So when Tom Luce, Perot's lawyer, called Johnson, Smith's lawyer, and said, "Perot will take a buy-out," there was no question of who had the upper hand. One of the basic business lessons Perot had learned from trading horses as a boy was that the one who needs the sale most is going to pay the price.

That was no time to dicker. Smith agreed to be more than generous. In all, he gave Perot $61.90 per share for his 11,300,000 shares. It broke down to $33 per share for the stock and $28.90 per share from the contingent note attached to each G.M. Class E stock. The contingent note guaranteed all other Class E stockholders returns of $62.50 per share by 1991. In other words, if Class E stock sold for $45 in 1991, G.M. was contractually bound to give each stockholder another $17.50. The buy-out simply paid Perot off in full--five years ahead of the agreement.

That Smith would have agreed to the bizarre terms of the buy-out, terms that virtually guaranteed the departure of most of E.D.S.' best people, becomes perfectly logical when Smith's vulnerability and Perot's superior maneuvering are considered. By any measure, the buy-out was totally lopsided. "I just kept making obscene demands," Perot said, "and they kept agreeing to them." In the agreement, Perot was not restricted from immediately starting up another E.D.S.-like company on a nonprofit basis and in three years converting it into a profit-making business and hiring every one of his original E.D.S. people away from G.M.

And just as important to the many E.D.S.ers left behind, Perot got written promises that Smith would finally live up to the original agreement. E.D.S. would receive fixed-price long-term contracts as quickly as they could be worked out. The promise of E.D.S. autonomy was spelled out in the buy-out agreement far more clearly than before. In other words, the key issues that Perot had fought for were conceded to him entirely.

"I really thought the board would tell Roger he was out of his mind. It was the dumbest business deal I ever heard of," Perot said. "I found during the negotiations that they'd agree to anything on the business side, no matter how ridiculous, but they were very tight on anything that had to do with criticism or taking over G.M. The anti-take-over provisions were very strong. I had to commit to not making any effort to take over General Motors for five years," Perot said, pausing to laugh. "I was happy to do that, because I had no interest in taking over General Motors."

Smith worked hard to consummate the buy-out. He called each board member in advance of the December first meeting to be certain he would vote his way. The entire decision was arranged before the board meeting, which, with virtually no discussion, led to a unanimous vote.

Yet with all that effort, the buy-out resulted in about one hour of peace for Smith. That's how long Perot waited after the contract was signed to issue a public statement:

At a time when General Motors is closing 11 plants, putting 30,000 people out of work, cutting back on capital expenditures, losing market share and having problems with profitability, I have just received $700,000,000 from General Motors in exchange for my Class E stock and notes.

I cannot accept this money without first giving General Motors' directors another chance to consider this decision. This money will be held in escrow until December 15 in order to give the General Motors directors time to review this matter and the events that led to this decision. If the General Motors directors conclude that this transaction of December first is not in the best interest of General Motors and the Class E stockholders, I will work with the G.M. directors to rescind this transaction.

Once again, Smith's inability to understand human relations caught him unprepared. He fully expected Perot to take his money and crawl into the woodwork. And he miscalculated public response, figuring that after taking a few days of heat for the buy-out, he could put it behind him. He had never been more mistaken.

Perot became a martyr of sorts. He was perceived as having spoken up for the common man--as having spoken the truth--and been squelched by a paranoid G.M. chairman. He was suddenly referred to as the man who could have been G.M.'s salvation. That he had spent the vast majority of his time in Dallas and had made only a handful of management proposals during his G.M. board tenure went unnoticed. What would G.M. do without its helpful critic? Or, as one columnist put it, "If you remove the grain of sand, do you still get the pearl?"

After Perot left town, there were not enough pieces left of Smith's credibility to fill a body bag. Every major constituency--employees, stockholders, customers and media--joined in picking apart Smith's vision of a 21st Century corporation. By almost every measure of management achievement--return on investment, stock prices as an expression of confidence, employee productivity and morale, market share (without artificial supports)--his leadership had failed.

Smith's 21st Century corporation was half of a very good idea. Technology is the future. But the other half of the equation--by far the more significant half--is the individual. A Stradivarius is only wood and catgut; the music is in the mind and hands of the performer. Getting 3,000,000 people to perform in harmony is G.M.'s ultimate task. When that happens, it will truly be a cultural revolution. But that will happen only when a leader who can establish trust and inspire commitment arises within the corporation. As Alvin Toffler says in The Third Wave, "Elites, no matter how enlightened, cannot by themselves make a new civilization. The energies of whole peoples will be required."

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The greatest rescue mission in Ross Perot's life will not be the time he sprang two executives from an Iranian jail but when he rescues all of his E.D.S.ers through a singlehanded assault on General Motors.

By the summer of 1988, the top E.D.S. executives still held contractually inside G.M. will be free to walk away with their pockets bulging with G.M. ransom money. They will just as likely join their leader-in-exile, Perot, to start an all-new corporation--financed through what may be the most generous buy-out agreement in corporate history. And recognizing Perot's flair for historical significance, one can even predict the date the new company will come into existence. It will be on June 27--Perot's 58th birthday, the 26th anniversary of the original E.D.S.' founding and the fourth anniversary of G.M.'s ill-fated acquisition of E.D.S.

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When Smith bought E.D.S., he said, "If we hadn't found it, I guess we would have bought a college somewhere in Iowa and started our own. We needed an entrepreneurial company that had the youth and enthusiasm to do the job." He later added, "We decided on E.D.S. because of its strong leadership. We need the E.D.S. spirit as much as its skills."

In the end, after spending three billion dollars, he will get neither.

"'If Roger Smith had set out to destroy all morale in the company, he couldn't have done a better job.'"