Wall Street cheers mergers because they create what the textbooks call “economies of scale.” But for Bank One Corp. employees wondering if the pending merger with J.P. Morgan Chase & Co. will vaporize their jobs, high finance is taking a back seat to questions about their own livelihoods.
“We’re toast,” said one Bank One worker, grimly quaffing a beer in a downtown bar Thursday.
Across the city, other Bank One employees’ reactions were more muted, but their worry was just as real–even though there are many unanswered questions about just how many people will eventually be terminated, and which types of jobs are vulnerable.
“I’m concerned and shocked,” said Stephanie Johnson, a 23-year-old Park Forest resident who works as an analyst in Bank One’s commercial banking division.
It’s too soon to panic, said Johnson, an 18-month employee at the bank. Still, she observed, the $58 billion agreement under which Bank One will be acquired “is good for the company, but it might not be good for the 10,000 people they predict will lose their jobs.”
“Everyone feels like they could potentially be under the ax,” said one Bank One computer-room worker who asked that his name be withheld. “About the only people who are safe are the ones who work in the branches. … That’s where we know there’s no overlap.”
The economic logic behind corporate mergers is harsh but easy to understand. When two companies combine, the surviving company needs only one payroll department, one human resources group and so forth.
If the merger partners are big, like Bank One and its colossal suitor, J.P. Morgan Chase, several thousand such “back office” positions typically become redundant and can be eliminated.
Together, J.P. Morgan Chase and Bank One employ about 175,000 workers. The companies say they think they can eliminate 10,000 positions by merging.
“Now remember, it’s not 10,000 people who are going to lose their jobs,” Bank One Chief Executive James Dimon emphasized Thursday. The positions will be eliminated over a three-year period, he said.
Attrition, or eliminating the jobs of people who leave for other reasons, will help minimize the number of workers who are fired, Dimon said.
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Mayor Richard Daley released a statement Thursday saying he is “sorry to see Bank One acquired by a larger New York-based company.” He also promised employment services for Chicago job losses.
The merging banks “probably will be able to manage that number of job reductions through relatively few involuntary departures,” predicted Randall Kroszner, a banking expert and professor of economics at the University of Chicago Graduate School of Business.
Even so, the process won’t be easy, he said. “To bring two large ships together is never an easy task. It’s got to be careful; it’s got to be slow.”
Management experts note that one hazard in trimming the workforce is the possibility that demoralized workers will let up in performance or start job hunting out of fear that they are about to lose their positions.
On Thursday, local bank employees said that would not happen. “You can’t have people stop doing their jobs because they’re nervous about what’s going to happen to them tomorrow,” said Matthew Spangenberg, a team leader in operations.
“I’ll do my job the same way I’ve always done,” said 58-year-old Doris Brown, a 15-year veteran who handles reports in the print center.
J.P. Morgan Chase CEO William Harrison said there will be post-merger workforce reductions in New York, but he didn’t expect those to be “huge.”
The banking giants have the most overlap in their corporate banking operations, Bank One’s Dimon pointed out, and staffing in that group will be adjusted.
Some observers have speculated that Bank One’s trading operations might be vulnerable to cutbacks because some of their functions duplicate J.P. Morgan Chase’s New York trading operation.
A Bank One capital markets employee who works in support of the trading group said he feared for his job, adding that traders are uneasy, too.
Others adopted a wait-and-see attitude. “It’s too early to tell,” said John Wright, a Dallas-based Bank One finance vice president whose job often takes him to the Chicago headquarters. “Nothing’s guaranteed in the corporate world anyway,” Wright said, “and you can’t control it, so what’s the point of worrying about it?”