(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, the story might be more meaningful by starting at the beginning.)
(Want a PDF version for Entries #1-10, #11-20, #21-30 formatted as an e-book? Entries #31-40 available soon. Click links for download. America’s 5th Revolution Volume I (Entries 1-10), America’s 5th Revolution Volume II (Entries 11-20), America’s 5th Revolution Volume III (Entries 21-30)
Scene: Jordan’s office with Matt, reporter for major publication. Matt has been asked by POTUS’ office to help write the story of GM. POTUS wants to use the information as part of a plan to help rebuild US manufacturing. Entries about GM begin #41.
Matt: “I don’t mean to beat up on Roger Smith but most of his decision seemed to erode GM’s strength.”
Jordan: “You want an interesting review of GM in the 1980’s? Watch the movie ‘Roger and Me.’”
Matt: “Michael Moore made that didn’t he?”
Jordan: “Yes. I think it was his first major movie.”
Matt: “How much of the movie is true and how much is Hollywood taking some liberties.”
Jordan: “Far more truth than fiction. But the important point….and what you and I have been talking about….is how the personality of the CEO affects the behavior of the corporation.”
Matt: “So you think the movie is more about Squeaky than GM. I really should not call him that but the more we talk the more appropriate it seems.”
Jordan: “Yes, it was almost all about Squeaky…and the name is appropriate.”
Matt: “I’ll watch the movie but tell me some more decisions you think are important. We still need to talk organizational structure.”
Jordan: “One decision that rarely gets discussed is academic. Years ago and I think late teens early 1920’s, GM bought a university in Flint, MI that was designed to help train auto executives. GM renamed it General Motors Institute of Technology or GMI.”
Matt: “GMI was a fully accredited university?”
Jordan: “All but the football team. Hard to get fans for football when you have University of Michigan and Michigan State so close. GMI offered degrees in engineering and business administration…and I’m not sure what else. But the main attraction was GMI co-op program.”
Matt: “Students combined school and work?”
Jordan: “School for 12 weeks, then work for 12 weeks, then back to school. Took five years to graduate.”
Matt: “Students worked mostly where…GM?”
Jordan: “Yes, but other companies sponsored students also.”
Matt: “During the work sessions, did students work in the same department each time?”
Jordan: “No, and that was a major benefit of the program. Students were assigned to work in virtually every section of the business – from the assembly line to the headquarters office.”
Matt: “Were classes all about GM?”
Jordan: “GM was often used as an example but students got a very well-rounded education.”
Matt: “How much was tuition?”
Jordan: “Students made enough money during the work sessions to pay for tuition and cover living expenses.”
Matt: “So families with limited income could send children to college at no cost. And, students were hired full-time at graduation.”
Jordan: “And one other major benefit. Matt, who are some of your closest friends?”
Matt: “People from my college days.”
Jordan: “Mine, too. And the same with GMI students. GMI students ended up knowing lots of people in GM – friends and people they worked for. I ended up as thesis advisor to 8-9 students, all of whom I got to know reasonably well. GMI students had a great network.”
Matt: “What about so-called ‘group think,’ where everyone starts to think alike. If everyone has the same educational background that can hurt creativity and innovation.”
Jordan: “I’m not sure what percent of GM middle and senior executives were GMI students. Maybe 15-20%.”
Matt: “So you don’t believe ‘group think’ was a problem. Then why did GM quit supporting GMI?”
Jordan: “To save money.”
Matt: “How much money?”
Jordan: “Believe it or not, I’ve heard is less than $10 million per year.”
Matt: “You have to be kidding. $10 million is like pennies to GM. $10 mil is not even a rounding error.”
Jordan: “I know. But Smith dropped support. I also think GMI got caught up in Smith’s revenge against Flint.”
Matt: “Revenge against Flint? You mean Flint, MI.”
Jordan: “Yes. We’ll talk about that if we have time.”
Matt: “Did GMI close after GM dropped support?”
Jordan: “No. It regrouped and changed its name to Kettering University…and is doing quite well, thank you.”
Matt: “Is that the same Kettering as Sloan-Kettering Hospital in New York.”
Jordan: “One in the same. And a bit of trivia. You know what Kettering is famous for?”
Matt: “Haven’t a clue.”
Jordan: “Next time you start your car, thank Mr. Kettering, aka Boss Kettering. Among his many inventions was the electric starter. Until then you could only start your car with a hand crank.”
Matt: “How do you know all this stuff, anyway?”
Jordan: “Who knows?”
Matt: “So Squeaky closes GMI and GM loses the benefit of management having a great network. But was the network really valuable? You didn’t go to GMI and you had a wide network.”
Jordan: “One more story about the network and then we’ll move on.”
Matt: “Hit it.”
Jordan: “I’m now at Buick. A guy in one of the departments I manage is a GMI grad. Call him Bagel Bill – not his real name, of course.”
Matt: “So what does Bagel Bill do?”
Jordan: “His official title is something like Sales-Engineering liaison. I cannot remember exactly.”
Matt: “What’s that mean?”
Jordan: “All I know if there is a problem in engineering or manufacturing that is affecting Buick’s ability to sell cars, Bagel Bill makes a few phone calls, has coffee with some people and the problem is fixed.”
Matt: “Using his network of old GMI buddies.”
Jordan: “Exactly. What I did not appreciate fully was how many problems he prevented.”
Matt: “What do you mean?”
Jordan: “I think it was Einstein who said ‘Intellectuals solve problems. Geniuses prevent problems.’ If that’s true, old Bagel Bill was a genius.”
Matt: “Did GM really understand the value of guys like that? Or, was Bagel Bill just another employee?”
Jordan: “At least under Squeaky, GM never really understood how valuable these guys were.”
Matt: “Give me an example.”
Jordan: “Bagel Bill was about 55 years old when I started at Buick. Because of his time at GMI he was technically eligible for retirement. So, when GM decided to cut back on employees, I was directed to offer him a retirement package.”
Matt: “Did he accept it?”
Jordan: “No, thankfully.”
Matt: “So, what’s the story?”
Jordan: “A year or so later, GM goes on another program to retire older employees. And this time Bagel Bill took the package.”
Matt: “Then what?”
![dutchBoy[1]](https://usrevolution5.com/wp-content/uploads/2014/05/dutchboy1.jpg)
Jordan: “Then what is all hell breaks loose. You know the story of ‘The Little Dutch Boy,’ who held back a flood by putting his finger in the dyke?”
Matt: “Of course.”
Jordan: “Well, Bagel Bill retiring was like the kid pulling his finger out of the dyke. We started to have problems with engineering and manufacturing that I never knew existed.”
Matt: “So Bagel Bill had taken care of problems…actually probably prevented problems…using his old buddy network from GMI.”
Jordan: “Stopping support for GMI also resulted in more employees not understanding how an auto company really works.”
Matt: “You were not GMI and you managed.”
Jordan: “True, but I had a lot of help from guys who had been around a long time, including a bunch of GMI grads.”
Matt: “What I just heard from you is a Smith created a double brain drain program. Retire the old guys who have vast institutional knowledge. Eliminate hiring new employees who have been trained in the auto business.”
Jordan: “You got it. Not very smart, huh? Plus, GM then obligates itself to a lifetime pension for the same people who could have been contributing to the company.”
Matt: “By the way, what did Bagel Bill do?”
Jordan: “Went to work for a GM supplier. So now GM is paying his pension and effectively paying again through the supplier.”
Matt: “And Squeaky was supposed to be a financial genius? If he did not understand how this was a lose-lose for GM, what did he understand?”
Jordan: “I didn’t know then and I don’t know now.”
Matt: “Let’s try to wrap up the Squeaky end. We need to close out the story.”
Jordan: “I hear you but we might need to add a session or two. I admit until we started to talk about the Smith era, I did not appreciate fully how bad his decisions were. It’s embarrassing.”
Matt: “OK, a couple more about Squeaky, then we have to move on. I’m interested in learning more about EDS and Ross Perot. You also need to more about Saturn.”
Jordan: “Let’s talk EDS and Perot. Like many companies in the 1980’s, GM was migrating to widespread electronic data bases. Also, like many companies, the data bases were not always integrated. Improvements were needed.”
Matt: “Do you agree having an EDS-like company help with the integration was a valid idea?”
Jordan: “Yes. But GM had a large IT staff. It’s not as if GM had been operating using quill pen and papyrus paper. The IT staff could have used some outside guidance but GM did not…repeat not need to buy EDS.”
Matt: “What was the integration like? Did EDS flow seamlessly into GM?”
Jordan: “Horrible would be an understatement. The EDS culture reflected the cowboy personality of Ross Perot. We know best. Get out of my way.”
Matt: “But EDS had been very successful.”
Jordan: “True. But I am going to repeat what I’ve heard from every person who gets involved in automotive after spending time in another industry.”
Matt: “And that is…”
Jordan: “Within the first three weeks of getting involved, the person says, ‘Gee, automotive is a lot more complicated than I realized.’ And usually there are a couple of expletives in the sentence.”
Matt: “Did EDS experience the same thing?”
Jordan: “Yes, but most EDS staffers were reluctant to admit it.”
Matt: “What about Perot?”
Jordan: “He’s on the Board of Directors and GM’s largest single shareholder.”
Matt: “Was he as outspoken on the Board as he was in public about other issues?”
Jordan: “Possibly more so.”
Matt: “How did Squeaky react?”
Jordan: “The way Squeaky always reacted to someone challenging him. Except with Perot, he couldn’t fire him so Squeaky bought him out to get him off the Board.”
Matt: “How much did GM pay Perot to go away?”
Jordan: “$700 million in 1986.”
Matt: “$700 million. Wow. That’s about $1.5 billion in today’s dollars.”
Jordan: “Plus, now GM owns EDS that no one inside GM wants, other than maybe Squeaky. And EDS employees are no longer lead by Ross Perot.”
Matt: “Sounds like a disaster.”
Jordan: “Worse. The money used to buy EDS and then take out Perot…all that money was diverted from product programs for the car divisions.”
Matt: “As you said earlier, the divisions were a bit tarnished but could have been polished up with some new product. Instead, the money is spent on buying EDS and then paying again to get Perot off the Board.”
Jordan: “Ugly, huh? Probably qualifies as ‘stupid is as stupid does.'”
Matt: “What about Saturn.”
Jordan: “Saturn drained even more cash. We’ll do Saturn and then end up with the reorganization. But let’s take a break.”
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