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GM Holds Talks With AT&T About EDS Unit

November 25, 1986|JAMES RISEN | Times Staff Writer

DETROIT — General Motors recently held talks concerning a possible sale to AT&T of at least part of Electronic Data Systems, the huge computer services subsidiary that it bought from Texan billionaire H. Ross Perot, the telecommunications giant confirmed Monday.

An American Telephone & Telegraph spokesman said the two companies have talked about a "wide range of options" concerning EDS, adding that those discussions "didn't preclude" the possibility of AT&T making an "investment" in EDS.

GM insisted in a statement that it has no plans to sell EDS and that it is not currently talking with any firm about a possible sale of its Dallas-based unit.

Still, a GM spokesman refused to deny reports that the auto maker held such talks with AT&T this fall and that those talks subsequently broke down because the two sides couldn't agree on a price for EDS.

The Wall Street Journal reported Monday that GM and AT&T initially discussed the sale of 25% of EDS to AT&T, with another 25% stake to be retained by GM and the rest to be spun off to shareholders in GM's Class E stock, a special subsidiary stock tied to EDS earnings. Later, GM and AT&T expanded their talks to include discussion of a sale of the entire EDS unit to AT&T. But the talks broke down because the two sides remained far apart on a final price tag for EDS, with GM demanding between $5 billion and $6 billion, the Journal said.

But the fact that GM would even consider selling EDS, just two years after acquiring it for $2.5 billion, is apparently another sign of the turmoil plaguing GM.

When GM acquired EDS in 1984, GM Chairman Roger B. Smith claimed that the purchase represented the first major strategic move toward a high-tech future for the world's largest auto maker.

But since then, that high-tech drive seems to have bogged down. In fact, with GM's market share slipping and the losses from its auto operations mounting, industry experts say that GM has precious little to show for the billions of dollars it has poured into its campaign to expand its use of advanced manufacturing technology.

The auto maker has found it especially difficult to integrate the technical prowess of EDS, with a lean, entrepreneurial style epitomized by Perot, its founder and chief executive, into the highly structured and bureaucratic GM system.

"Comparing GM to EDS is like comparing the Queen Mary to a marine runabout," observed David Cole, director of the Center for the Study of Automotive Transportation at the University of Michigan and the son of former GM President Edward Cole.

Perot, impatient at the pace of change inside GM, has even started to publicly criticize the auto maker's top management for the company's many problems, leading to speculation that a rift has developed between Perot and GM Chairman Smith.

Other analysts wondered how EDS could be cleanly split from GM now that so much of its business comes from meeting the auto maker's communications and computer needs. GM has already transferred thousands of data processing employees to EDS, and EDS technicians now provide computer and communication services in plants and offices throughout the GM system. "How in the world could they pull them apart?" asked one analyst.

"I see this as bringing AT&T into augment the process, not necessarily as a result of a conflict between GM and EDS," noted Cole. "EDS is handling advanced communications and telecommunications systems for GM, but it has a lot of inexperienced people now because it has grown dramatically since GM took over. So I think AT&T could bring a lot of value to the situation."

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