Shearson, Smith Barney Discussions Confirmed : Brokerages: American Express says “very preliminary” talks about a merger or venture have been held. It also said it would lay off 2,000 workers.

American Express confirmed Wednesday that it has held preliminary, exploratory talks about a possible merger or other business combination between its troubled brokerage unit, Shearson Lehman Hutton, and Smith Barney, Harris Upham & Co.

An American Express spokesman said late Wednesday night that “very preliminary” discussions have been held but that no concrete proposals are on the table. The spokesman said he did not know if further discussions will take place.

If some sort of merger were to occur, it would mark a dramatic comeback for Sanford I. Weill, chairman of Primerica Corp., the parent of Smith Barney. Weill is a former head of Shearson who built the firm into one of America’s largest brokerages before he sold it to American Express in 1981 for $930 million. Weill left American Express reportedly because he couldn’t get used to being second-in-command to James D. Robinson III, chairman of American Express. The spokesman insisted Wednesday night that “no specific proposals were discussed.”

Shearson also announced Wednesday that it will lay off 2,000 workers in the next few weeks as part of a cost-cutting program designed to save the firm about $400 million annually.

In a letter to employees, Howard L. Clark Jr., Shearson’s new president and chief executive, said the layoffs and cost-cutting program would result in a “significant” one-time charge, which would have a negative impact on first-quarter earnings. But a spokesman refused to say how large the charge will probably be or whether Shearson expects to report a loss for the quarter.

Wall Street sources said that since last summer, American Express has made clear that Shearson is for sale and has approached various U.S. and foreign concerns about selling all or part of the giant brokerage. Among those rumored to have rejected proposals are a Japanese concern, Nomura Securities International, and Salomon Bros. If Shearson were combined with Smith Barney, the resulting firm would employ more brokers than any other Wall Street house.

Senior officials of Primerica couldn’t be reached for comment, and a spokeswoman for the company refused to answer an questions about talks with American Express. Earlier Wednesday, an American Express spokesman had said, “There is no talk of selling any part of Shearson.” But the spokesman later didn’t rule out the possibility of some sort of combination that might leave American Express and Primerica as joint owners of a merged Shearson and Smith Barney.

Shearson has gone through turmoil recently and has been strongly affected by the overall downturn in the securities industry. Its chairman, Peter A. Cohen, resigned under pressure Jan. 30, and American Express canceled plans to raise capital for the unit by making a $250-million rights offering.

Instead, American Express said earlier this week that it would bolster Shearson’s capital itself, injecting $750 million and thus increasing its 61% stake in Shearson to an as yet unspecified level.

In announcing the layoffs, Clark told Shearson employees Wednesday that the firm was considering a broad range of options to improve its operating position, including the possibility of “entering strategic partnerships in certain markets.” Clark did not elaborate, however, on what form such partnerships might take.

The firm said it also considering leaving or reducing its involvement in certain businesses.

The layoffs will contribute to the flood of unemployed securities industry workers. Most Wall Street firms have reduced their staffs, and the demise of Drexel Burnham Lambert Inc. is expected to dump more than 5,000 workers into the contracting Wall Street job market. Merrill Lynch has also said it is laying off several thousand employees.

A Shearson spokesman said the termination notices would go out within the next few weeks. He said the layoffs would be “firm-wide,” but he declined to disclose which departments would be most affected. Shearson has slightly more than 35,000 employees.

SANFORD WEILL: Analysts say the turnaround artist is ready for a big comeback. D7