General Motors: Avoiding Bankruptcy by Learning how to Tap-Dance

This year marks 20 years since the debut of Roger & Me, Michael Moore's frumpy, scathing tour de force about the Flint, Michigan economic fade-out that Moore blamed chiefly on General Motors' Chairman and CEO Roger B. Smith.

I loved the movie the first time I saw it and I still like it. I think perhaps time hasn't been as kind to the film as we might have thought back in the day—after all, Moore's pursuit of Smith is deeply one-sided and heavily edited for effect, making a villain of a man who barely even appears in the film (arguably few portray themselves more poorly than Bob Eubanks).

Nonetheless, as GM downsizes and outsources, Roger & Me highlights the end-result of this trickle-down corporate carelessness.

The question is, in 1989 how did General Motors come to be in such a mess? Here's one theory.

In addition to the film, 2009 also marks another GM milestone. In 1984, 25 years ago, they paid over $2 billion for a computer services firm named Electronic Data Systems, or EDS. The idea was to infuse GM with the kind of high-tech capabilities that would put them front-and-center in the automotive industry of the future. In retrospect it seems like a gutsy move by Smith, a career executive short on true creativity, but in reality it did nothing more than expose GM culture as bloated, rigid, and arrogant, and set the stage for it to get battered to a pulp by someone as clever—and angry—as Michael Moore.

Austin Ligon, the former CEO of CarMax, made a fitting analogy about GM, saying it was like a 190 lb world-class athlete trapped in a 400 lb man's body.

After all, the purchase of EDS put that company's founder on GM's Board of Directors. His name, of course, was H. Ross Perot.

Say what you will about the former Presidential candidate; Perot's record as a nonconformist who knew how to get things done was precisely what GM needed at the time. Alas, they were too arrogant and too greedy to know it.

From the start, Perot demanded control over the role EDS would play in within General Motors, leading to a stand-off with Smith.

Smith, far less willing to cede power than to see the company grow, managed to gain Perot's resignation—one that cost the company something in the high hundreds of millions of dollars, and more importantly, one that cost them the opportunity to make changes to a system that wasn't working.

Perot and Smith

Much like the car company's deaf-eared responses to the negative Carnegie Melon report on the Volt, as well as Rob Kleinbaum's unread letter urging a cultural shift, the ousting of Perot—a self-made man who knew how to run a successful company—should have served as an early-warning sign that a cancer loomed at GM.

Now on the brink of collapse, the hulking, unbending GM culture needs to drop the posturing and limber up. Recently Austin Ligon, the former CEO of CarMax, made a fitting analogy about GM, saying the company was like a 190 lb world-class athlete trapped in a 400 lb man's body. Their survival today requires not just trimming the fat but slashing it; GM has to become more nimble and more flexible if it has any interest in staying in business.

Or in Perot's own terms, it's an elephant that needs to learn how to tap-dance.

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