Merrill Lynch Plans Layoffs, Salary Freezes : Commissions Also to Be Reduced in Restructuring
Merrill Lynch & Co. said Monday that it would lay off an unspecified number of employees, reduce commissions and freeze some salaries next year as part of a cost-cutting restructuring.
Officials of the giant investment firm declined to state how many employees could lose their jobs or how much money it could save by the cutbacks.
Separately, E. F. Hutton Group indicated that this week it would begin notifying employees who are to be laid off immediately or after completion of its merger with Shearson Lehman Bros. Holdings.
Hutton and Shearson officials have estimated that a total of 5,000 to 6,000 employees at the two firms could lose jobs as the firms integrate during the next six months.
Merrill Lynch said its cutbacks were part of a 3-year-old strategic plan aimed at focusing resources on core businesses and streamlining to meet market conditions. However, those changes were accelerated by the stock market’s October crash.
Less for Brokers
Merrill Lynch officials said the firm planned to cut costs and improve profitability next year chiefly by lowering compensation to employees, improving how it processes business and making selective increases in prices--such as fees--of financial products.
Key elements in the plan will be compensation cuts. Merrill Lynch will reduce commissions to its 12,200 retail brokers by 6% next year, which could save about $65 million if retail revenue remains the same as in 1987, officials said.
The firm also will cut the amount of money paid for 1988 performance bonuses by 10% from this year. Officials declined to say how large the bonus “pool” was last year or how large it was expected to be for 1987.
Other cost-cutting measures will include a six-month salary freeze for non-clerical employees, continued review and reduction of management costs, and “selective reductions” of payrolls in areas warranted by business conditions.
William A. Schreyer, Merrill Lynch’s chairman and chief executive, said the size of the layoffs would depend on how individual managers decided to meet their cost-cutting guidelines.
“We’re not doing it in terms of bodies,” he told a news briefing.
Merrill Lynch brokers were informed about the cutbacks through a videotaped presentation by Joe Grano, director of sales, who contended that a “precipitous” cut in costs was necessary in light of the consolidation on Wall Street and the uncertain conditions created by the October crash.
Took Other Steps
Schreyer said managers reacted favorably when told of the cuts at a meeting in Chicago on Sunday.
Other steps taken under the restructuring have included the sale of real estate operations, the sale of commercial real estate and leasing portfolios, and a 25% staff reduction in municipal bond operations over the past two years.
With 482 U.S. branch offices and 12,200 account executives, Merrill Lynch claims to be the nation’s biggest retail brokerage.
Its parent, Merrill Lynch Inc., earned $454.3 million, or $4.30 a share, on revenue of $9.61 billion in 1986. At the same time, expenses grew by 35%, reflecting the torrid growth on Wall Street due to booming business and to expansion in global financial markets.
In another development in the securities industry, Alex. Brown Inc. of Baltimore announced Monday that it will reduce its employees at year-end by about 60 people, primarily in the support and back office areas. After these cuts, the brokerage will employ about 1,600.