GM Buys Perot Out for $750M; He Calls It ‘Morally Wrong’
H. Ross Perot, the feisty billionaire founder and chairman of General Motors Corp. subsidiary Electronic Data Systems Corp., has resigned after months of feuding with GM Chairman Roger Smith, the auto maker said today.
GM’s board of directors approved the buy-out of all of Perot’s GM stock for about $750 million at its regular monthly meeting in New York today.
(In Dallas, Perot said he will give the auto maker two weeks to reconsider its “morally wrong” buyout plan that would close 11 factories and throw 30,000 people out of work.
(He told United Press International that he has placed $700 million in an escrow account for 15 days to give GM’s board time to rethink his ouster. “I’ve got to live with myself,” Perot said. “Why should I take this money? It would be morally wrong.”)
GM said that EDS, which it bought two years ago for $2.5 billion, will be incorporated into a new division along with subsidiaries Hughes Aircraft Co., Delco Electronics and GM’s defense operations.
GM said Perot resigned from the auto giant’s board and as chairman and chief executive of EDS.
$33 a Share
GM’s board approved purchase of all of Perot’s shares of GM Class E shares at $33 a share, or about $400 million, and about $350 million in contingencies agreed upon when GM bought EDS. Perot was GM’s largest individual shareholder.
GM also planned to buy the stock of three other top EDS officials, the Wall Street Journal reported today. But a GM spokesman said he could not confirm that the offer had included the three officials.
In a statement, Smith said, “H. Ross Perot’s entrepreneurial spirit and visionary ideas have been of tremendous benefit to the company.
“The strength of our relationship has been that we have approached our common business problems in different ways, using the perspectives of different backgrounds,” Smith said.
“We have always agreed on the primary goal: to be the leader in our industry and the most technologically advanced company in the world.”
Increasingly Vocal Criticism
In recent weeks, however, Perot has become increasingly vocal in his criticism of what he has said is GM’s sluggishness, inefficiency and top-heavy management.
“We’ve got to nuke the GM system,” he said at one point.
Among Perot’s criticisms of GM were that the world’s largest auto maker was too bureaucratic and that its management was out of touch with its workers.
For instance, Perot had recommended publicly that GM eliminate executive parking and dining rooms and move the executives out of their suites on the 14th floor of GM headquarters in Detroit.
Smith seemed to take the criticism in stride, saying that Perot wanted what all GM management wanted for the corporation. But recently he began lashing back at Perot in interviews with Detroit newspapers.
GM also reportedly tried to sell all or part of EDS to American Telephone & Telegraph Co. last month, but the deal fell through.
Atwood Heads New Unit
GM’s new business unit will be headed by Donald J. Atwood, GM executive vice president and director, Smith said.
Thomas J. O’Grady, industry analyst and president of Integrated Automotive Resources in Wayne, Pa., said Perot’s exit would cause problems at GM and at EDS.
He said investors also would question whether GM would be able to run EDS successfully without Perot.
Perot, 56, a graduate of the Naval Academy, started EDS with $1,000 in 1962 after working for IBM for five years. He made front page news in 1979 when he sent a team of 15 commandos to Tehran and started a mass prison break so he could free two EDS employees. The raid became the subject of a best-selling book and television mini-series.
Philanthropy also became a Perot hallmark as he worked on behalf of prisoners of war and those listed as missing in action in Vietnam. Texas governors also enlisted him to head commissions to fight drugs and improve education.