Kemper to Cut Jobs at Bateman Eichler
Kemper Corp., the parent of Los Angeles-based Bateman Eichler, Hill Richards Inc., added its name to the long and growing list of companies that are paring their brokerage operations to cope with the continuing slowdown in the securities industry.
Kemper, which owns five regional brokerage houses with 5,200 employees, said it will lay off 600 workers and take a $126.5-million after-tax charge against earnings because of the restructuring, which will force the consolidation of many brokerage functions.
Company officials would not speculate about the effect of the restructuring on Bateman, one of Los Angeles’ oldest and largest regional securities firms. However, Bateman insiders said they feared Kemper would lay off most, if not all, of the firm’s 63 traders.
Kemper said it plans no cuts in sales or research staffs and is still committed to its network of regional firms. The firms will maintain their distinctive names, which Kemper calls “one of the major assets of the group.”
Layoffs will primarily affect “back office” functions, such as accounting, data processing, telecommunications and human resources, said James R. Boris, chairman and chief executive of Kemper Securities Group Holdings, a company that was formed last January to manage Kemper’s investment houses. Boris said about 50 of the 250 traders employed at Kemper’s five regional firms will be let go, but he would not speculate about how many Bateman traders would be affected.
“It’s all rumor at this stage,” said one Bateman executive. “But there is a lot of speculation that they’ll get rid of our traders. Kemper is just tired of pouring money in year after year.”
The moves also leave in doubt the future of Richard Capalbo, Bateman’s president and chief executive. Capalbo, a hard-driving salesman who formerly worked for Drexel Burnham Lambert Inc., is rumored to be upset by the changes, which are stripping authority from the regional brokerage heads.
Kemper says it does not plan to jettison its brokerage presidents. But the head of another unit, Milwaukee-based Blunt Ellis & Loewi, resigned last week, and industry insiders say Capalbo may not be far behind. Capalbo could not be reached for comment.
The consolidations are a major switch in strategy for Chicago-based Kemper, which has been assembling its loose-knit brokerage franchise since 1982 on the premise that each of these firms would continue to operate independently. The company owns such well-known regional firms as Bateman; Cleveland’s Prescott, Ball & Turben; Boettcher & Co. of Denver; Blunt Ellis in Milwaukee, and Lovett Underwood Neuhaus & Webb Inc. in Houston.
In recent years, however, Kemper’s brokerages have become unprofitable. The group lost $7.2 million in 1989, compared to a $2.4-million loss in 1988 and a $3.6-million loss in 1987.
“They wanted to keep all the brokerage houses intact, but they were just not profitable,” said Joan T. Goodman, analysts with Pershing & Co. in Chicago. “I think they would have left them alone if they just weren’t losing money.”
Kemper said it will save $30 million annually in employee benefits and other expenses once the plan is fully implemented next year.
This year, Kemper’s writeoffs, which will create an $18-million reserve for employee-related expenses and other costs, will severely depress earnings.
Kemper earned $307.4 million in 1989. The company’s shares closed Wednesday on the New York Stock Exchange at $39, up $1.375.
Kemper also plans to buy back as much as 2.2 million shares of its own stock, the company said. Earlier this year, Kemper repurchased about 339,000 shares.
“The stock repurchase program increase reflects our confidence in the restructuring plan,” said David B. Mathis, Kemper’s president and chief operating officer, who added that he also believed that it was a good use of stockholder funds, given the current market environment.