Marital Spat Gm's

By Philip Elmer-DeWitt.

"A modern industrial miracle." That is how General Motors Chairman Roger Smith has characterized the 1984 merger between GM, the world's largest industrial company, and Electronic Data Systems, the biggest computer-services firm. But the marriage of the two giants has not been completely harmonious. From the beginning, there have been predictable problems in integrating EDS's data services into GM's far-flung operations. Worse, EDS Chairman Ross Perot, who is now GM's largest stockholder (11.3 million shares) and a member of the board of directors, has become a burr in Smith's side. Perot has publicly sniped at the automaker's management for its isolation, resistance to change and indulgence in old-boy perks like chauffeured limousines.

For those reasons, some industry experts seemed ready to believe a report in the Wall Street Journal last week that GM had conducted two months of unsuccessful negotiations with AT&T about the possible sale of all or part of EDS. Analysts thought the talks might have been related to GM's mammoth cost- cutting effort. In recent weeks, GM has announced plans to close ten factories, terminate 29,000 workers and reduce by half the planned output at its proposed ultra-computerized Saturn plant in Tennessee. Said Ann Knight, who follows the auto industry for PaineWebber: "If GM should really downsize itself, some of its need for EDS would go away." Some observers think the negotiations did not focus on the sale of EDS but on increased business -- or a possible joint venture -- between EDS and AT&T.

AT&T confirmed that it had talked to EDS "on a wide range of options that did not preclude investment." But GM Chairman Smith, while acknowledging the AT&T talks, denied that he had ever considered unloading his computer subsidiary. "EDS isn't for sale," he told the editorial board of the Detroit Free Press. "We have never had it on the block or anything like that."

Smith did, however, fire back a few potshots at his boardroom critic. Perot "wants nothing better than the best for GM," Smith said, adding that "he is a different type of guy than we are in GM. He is impatient. I think part of it is just his natural inclination. Part of it, of course, is (that he is) not very familiar in total with our business." As for charges that GM gives its executives excessive perks, Smith retorted that Perot's office at EDS in Dallas "makes mine look like shantytown. He has a Gilbert Stuart painting hanging on the wall. Nobody runs around saying, 'Get rid of Ross's office.' "

Despite the clash of personalities and corporate cultures, it seems unlikely that GM could easily untangle itself from EDS. When the two firms merged EDS took control of all of GM's computer operations, including its mainframe computers, thousands of individual terminals and 10,000 data- processing employees. Systems engineers from EDS now provide the software that runs manufacturing robots in GM plants. EDS computers do everything from processing GM's payroll checks to printing the price stickers for its new cars. If Chairman Smith even briefly entertained notions of dumping Perot, he may simply have been engaging in wishful thinking.

With reporting by William J. Mitchell/Detroit