Wells Fargo's chief executive led a veritable pep rally for Wachovia employees at the bank's uptown headquarters on Wednesday, intending to soothe the company he's about to buy but offering few details about what it will look like after the takeover.
Twelve days after Wells Fargo announced it would purchase Charlotte's second-largest employer, its CEO, John Stumpf, told Wachovia workers that his job is “to help all of you stay with the company,” but added, “obviously, no commitments, no promises.”
Stumpf, a Minnesota native who, unlike former leaders of Wachovia, has no deep roots in North Carolina, also spoke to swirling concerns about the takeover's effect on local philanthropy, where Wachovia has been a major engine.
“We have never seen a bank do well over time where a community does poorly,” he said, speaking from a stage decorated with balloons of blue and green on one side – Wachovia colors – and red and yellow on the other – Wells' colors.
Stumpf, excited and congenial, met a receptive audience that laughed at his jokes and afterward used such words as “uplifting” and “encouraged.” Still, analysts believe that Charlotte is bound to lose jobs as a result of the Wells takeover, and some shareholders continue to criticize the deal.
Analyst Nancy Bush of NAB Research said this week that integrating the two companies “will be a long and tough slog” that will involve “several years of pretty ugly results.” Wachovia's shares fell 4 percent Wednesday, as the Dow plunged 8 percent.
Stumpf shared the stage with Wachovia chief executive Bob Steel, who was brought to Wachovia in July to try to save the bank. That was a month after it dismissed CEO Ken Thompson, who took the blame for the 2006 purchase of Golden West. The bank's board has also been criticized for approving the deal. The California mortgage lender, known for nontraditional loans, has crippled Wachovia, which lost $9.1billion in the second quarter. Steel announced turnaround plans a couple weeks after he joined, which included freeing up more than $5 billion in capital through job cuts, shedding noncore assets and other measures.
Steel and Ben Jenkins, president of Wachovia's general bank, both said they wished Wachovia could have remained independent but deteriorating market conditions forced them to look at other options.
The last time Wachovia held an employee rally in its uptown Atrium was July 10, Steel's first full day on the job. Board chairman Lanty Smith was at Steel's side that day but wasn't on stage Wednesday.
Wednesday, Steel said that Wachovia employees should be able to get back to business after a stressful and uncertain several weeks, which saw Wachovia pushed into quickie marriages with Citigroup, then the higher-paying Wells, by anxious regulators.
“Let me just tell you, the last month or two we've lived on our heels in a defensive position,” Steel told reporters. Now, he said, “the issues that we've had to deal with on our balance sheet will be less important, and our loan officers can get back to making loans, our people can get back to their front foot, and that's going to be liberating and exciting for all the Wachovia colleagues.”
Employees laughed when Steel told them that it wasn't fair for them to be “too uncomfortable” with the deal, considering how Wachovia itself is the product of “a hundred mergers.”
Wachovia will take the Wells Fargo name, and both Steel and Stumpf talked about how their companies are a good match culturally and geographically. Analysts have long speculated about a merger of the two companies, which are East Coast and West Coast powerhouses with little overlap.
Regulators at the Federal Reserve and the Federal Trade Commission have quickly given their blessings to the deal, which still requires the approval of Wachovia shareholders. That shouldn't be a problem, since Wachovia last week said it would give preferred shares representing almost 40 percent of its shareholder voting power to Wells.
That's garnered ire from a Charlotte-based shareholder group called Wachovia Vote No, which sprung up after the Citi deal was announced Sept. 29.
“What it tells us is that the Wachovia Board of Directors and Management do not trust us, the stockholders of the company,” the group wrote in an online post Tuesday. Also, Citigroup is suing Wells for $60 billion, saying Wells wrongly interfered with its agreement to buy Wachovia.
Wells has said it plans to cut expenses of the combined company by 10 percent annually, or $5 billion, by the end of 2010. Stumpf said Wednesday it is “way too early to tell” how much of that cost savings will come out of personnel.
Stumpf knew he was talking to employees who, despite their enthusiastic reception, are nervous about losing their jobs. He opened with light-hearted stories about growing up on a dairy farm, and he referred to the Wachovia employees as “equal merger partners.”
He said he'll try to keep employees whose jobs are eliminated by retraining them for new positions.
Stumpf, whose audience included local civic and economic leaders, also noted how Wells Fargo's predecessor had actually added jobs in Minneapolis after moving its headquarters from there when Norwest merged with Wells in 1998.
“I can't promise the same thing for Charlotte,” he said, but he worked hard to show his enthusiasm for the area, talking about how welcome he felt and his crash course on Carolina trivia. “I know why you're called the Tar Heel state. … I've studied everything. I know about your birds and your trees.”
Employees laughed when Jenkins told them that Stumpf had paid his way through college playing in a band called The Mason-Dixon Line.
Wells will base its East Coast headquarters here, though Stumpf said it was too early to get into details about what that might look like. He said the two companies started naming people to lead the integration over the weekend. He also said he plans to close the deal in December, but added that the company has no concrete timeline for the ensuing integration and won't make any decisions in a hurry. Wells Fargo is famous in the banking world for taking about three years to integrate with Norwest.
There's been speculation that Wells would get rid of Wachovia's investment bank, an area that Wells has long avoided, but Stumpf told reporters that “there have been no decisions about anything.”
“We will take our time on all these businesses,” he said. “Some businesses are new to us, some businesses that we do will be new to Wachovia, and our job is we are not a product-specific company, we're a customer-centric company.”
Stumpf said they'll retain any units that “can help us serve the customers” and “we're open to anything.”
He told reporters that he expects local philanthropy “would be very consistent with Wachovia's attitude” and said that such decisions are made locally, not at San Francisco headquarters. “Wherever earnings are made is where it's invested (in the community),” Stumpf said.
Employees, some of whom withheld their names because of job sensitivity, said they generally liked what Stumpf said.
After a couple of weeks of uncertainty, “it's good to hear some optimistic news about the future,” said Mike Traynor, who works in Wachovia's treasury services. He's heartened by the complementary footprints and similar cultures and agreed that Wells' attitude of “‘retain and retrain' is a good concept.”
Preserving positions in Charlotte is “what everyone in this room is wondering about,” said another employee, who works in the auditing department.
Another employee who works in credit cards said she didn't get the impression that Wells and Stumpf would “slash and burn” jobs in Charlotte.
“He said it would be a joining of equals, when it obviously is not,” she said. “That was very graceful. He didn't have to say that.”