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Workers in N.C. await news on Wachovia jobs
Cuts are expected in Charlotte operations
Wachovia CEO Bob Steel says that the integration of Wachovia into Wells Fargo is proceeding appropriately, although Wells Fargo has been known for taking a relatively long time to integrate companies in mergers.
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Published: November 21, 2008
CHARLOTTE - Wachovia's chief executive said yesterday that the bank's sale to Wells Fargo is progressing appropriately, but that the details won't be wrapped up as quickly as some people might like.
"The integration is proceeding just as you would hope and is appropriate," Bob Steel, who became CEO four months ago, said in a breakfast meeting at the Charlotte Convention Center. "I would just tell you that there's been a lot of traffic on USAir between Charlotte and San Francisco."
Wachovia announced in October that it would sell itself to Wells Fargo, based in San Francisco, after bad mortgage loans and pressure from regulators pushed it to the brink of bankruptcy. Last week, Wells sent a memo to Wachovia employees announcing the 12 top managers for the combined company. Only one, David Carroll, is from Wachovia.
Steel, speaking to a city nervous about losing jobs, said that the next step in the Wells integration will be allowing those 12 managers to choose their teams.
"This will not happen in an even way," he said, and it won't happen at a speed that makes everyone comfortable. But the banks will take the time they need to make sure the integration is done correctly, he said. Norwest, which bought Wells Fargo in 1998 and took its name, is famous in the banking world for taking a relatively long period of three years to integrate the companies.
Wachovia has about 2,900 employees in Winston-Salem, who mostly work for the information-technology group and Wachovia's wealth-management division. Uncertainty remains about whether jobs will be cut.
It's likely that Wells will cut jobs in Charlotte, with the fate of Wachovia's investment bank producing particular anxiety. Throughout its history, Wells has largely avoided investment banking, which can offer high returns but also high risks. Steel said that the investment bank "would be best served by having a customer-centric model, and I think that's the direction Wells Fargo will move." But he said that it would be unfair and probably inaccurate to speculate further. Wells has already indicated that it will pare down Wachovia's investment bank.
Steve Cummings, who ran the investment bank, will not stay on with the combined company. Cummings, who attended the meeting, said beforehand that he is also not sure of Wells Fargo's plans for his unit. "They're doing their work, they're not sharing a lot right now," he said. But "they're good people, they're doing good work. I'm optimistic."
Wells Fargo CEO John Stumpf sent a videotaped message to the meeting, which was sponsored by the Charlotte Business Journal. "We will do all we can do as a combined company to earn your trust and to continue to be a community leader in Charlotte, North Carolina."
Steel, for his part, touched on themes he has repeated often for the past month and a half, saying he was disappointed that Wachovia could not remain independent but that the Wells Fargo deal is the best plan for moving forward. Without the Wells deal, Wachovia could have been forced into receivership of the Federal Deposit Insurance Corp., and shareholders would have gotten nothing, he said.
"I recognize that there are people that have different perspectives, and it's always good to hear those perspectives," he said, but he added later that he has discouraged colleagues who may think that the sale is not the best plan. "I tell them, ‘Stop right there,'" Steel said, noting that Wachovia itself was formed from more than 100 mergers.
Some analysts and shareholders have said that Steel should have raised capital from the markets when he first came to Wachovia in July, riding the good will surrounding his new assignment. But Steel said that it would have been difficult to do that, given the "large chorus of investors" who didn't want the value of their shares diluted. Steel also defended his Sept. 15 appearance on Jim Cramer's Mad Money TV show, where he said that Wachovia "has a great future as an independent company."
That's raised the ire of some shareholders, since the bank announced two weeks later that it would sell itself to Citigroup. (Citigroup's offer was later trumped by Wells.) Steel said that market conditions deteriorated over those two weeks, and noted how he also said in his TV appearance that "we're a public company, so we're going to do what's right for shareholders."
Steel, who will not stay on with the combined bank, said he isn't sure what he will do next but said he doesn't regret his time at Wachovia. Asked whether he might serve on the board of the combined bank, Steel noted how Wells Fargo said this week that three or four Wachovia board members will join the combined board, when it had previously said that only three Wachovia board members would join. "Now you know what I know," Steel said.
Steel, who left a job at the U.S. Treasury to come to Wachovia, spoke broadly on government policy in the current financial crisis. He praised his former boss, Treasury Secretary Henry Paulson, for his hard work, and referenced a quote from former British Prime Minister Margaret Thatcher -- "The freedom to fail is essential to the freedom to succeed" -- to illustrate his own opinions toward government intervention in the markets. But he said that the financial industry's unprecedented turmoil is "really testing a lot of us in our basic beliefs."
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