Union Bank’s Workers Ponder Their Future : Some Concerns Raised Over New Japanese Owner

A mixture of relief and apprehension ran through Union Bank in Los Angeles on Wednesday as employees puzzled over their future under Japanese bosses.

The cause of the relief was twofold: Months of turmoil involving who would buy the bank ended Tuesday, and the buyer was not Wells Fargo. Union employees had worried that Wells would make huge staff cuts, as it did when it bought Crocker National Bank in 1986.

San Francisco-based Wells had talks with Union’s British owners, Standard Chartered, but the ultimate purchaser was California First Bank, which is 77% owned by Japan’s Bank of Tokyo. California First agreed to pay $750 million for Union, the largest Japanese investment so far in a financial company in the United States.

The Japanese involvement, however, created a new set of worries within the bank and in the California Legislature. A bill was introduced Wednesday to allow out-of-state banks to compete to buy California banks when foreign companies emerge as bidders.

Some Union executives expressed concern over whether Japanese management style would conflict with the way business is run at Union, where one of the industry’s purest incentive compensation plans has thrived for several years among loan officers and others.

“An individual’s pay is pretty directly tied to their individual performance,” a Union executive said. “Basically, that goes against the sociological orientation of the Japanese, which is a group orientation. This concerns me because, if they were to dismantle it, it would cause us problems.”

Concerns also were voiced on another sensitive issue: how women will fare. California First has no women among the 28 members of its senior management and Japanese companies are not regarded as progressive employers for women.

Women Play Key Role

“We’ve taken off our shoes and we’re learning to make tea,” joked one female Union official.

Union’s record is not exactly stellar: only four of its 76 senior managers are women. However, many key account executives are women.

“A major portion of the most effective group is this bank is women,” one executive said. “You wonder what roles there will be for these women, particularly in dealing with Japanese customers.”

Changes at Union are expected to come slowly. About nine months will be needed to obtain the regulatory approvals necessary to close the deal. And Seishichi Itoh, president and chief executive of California First, said Union will remain an autonomous unit for about a year after the merger.

“It is smart for us to move that way,” said Itoh, whose bank is headquartered in San Francisco. “They have good quality people there and we need some time to evaluate them.”

Itoh said there is little business overlap between the banks and that no layoffs are planned soon. However, banking analysts predicted that there will be substantial layoffs down the road to benefit from the economies of scale that accompany a merger.

For instance, Union employs 1,060 people in a sophisticated, year-old data-processing center in Monterey Park. California First has 520 employees at three data-processing centers in San Diego, Los Angeles and San Francisco.

A spokesman for California First conceded that layoffs are possible in that area, particularly since the two systems are not compatible.

“Some people may be relieved that they don’t have to look for new careers overnight, but we’re still pretty unsettled here,” a Union data-processing employee said.

Reaction from Union customers to the deal was muted, according to two bank executives.

“No one was terribly surprised and they took it as a ho-hum sort of issue,” said one executive after a lunch with several corporate clients.

Another executive telephoned his top customers to point out that Union will benefit from such things as Bank of Tokyo’s strong credit rating and to explain that it would be business as usual for at least the next year.

It may be longer, if the experience of Leonard Weil with Japan’s Mitsui Bank is a precedent.

Behave Like Americans

Weil was president of Manufacturers Bank in Los Angeles when it was purchased by Mitsui in 1981 and he said in an interview Wednesday that there have been few big changes since then.

“They have been absolutely no different from American management,” said Weil, who remained head of the bank until 1986 and is now president emeritus. “My impression is that when the Japanese come here, they behave like Americans.”

Mitsui Manufacturers, as the bank is now called, has a Japanese president now and California First has five Japanese nationals among its top six managers. Sixteen of the 22 senior vice presidents at California First, however, are Americans, including one Japanese-American.

Some Americans, notably officials of large East Coast banks, have been angered that California law allows affiliates of foreign banks to acquire banks in the state while out-of-state institutions are forbidden to do so until 1991, when an interstate banking law passed by the Legislature takes full effect.

Assemblyman Ross Johnson (R-Fullerton) introduced a bill Wednesday that would permit out-of-state institutions to enter the bidding for a California bank when a foreign potential buyer is involved. An aide to Johnson said the timing was coincidental.