A New Deal fo First Interstate : PROFILE: THE RESCUER : Grundhofer Now Rival of Former Colleague
By locking horns with Wells Fargo & Co. over rights to First Interstate Bancorp, Minneapolis banker John F. (Jack) Grundhofer will do battle with friends who have suddenly become rivals--the executives he worked closely with during his 12-year career at Wells Fargo.
But Grundhofer, chief executive of First Bank System Inc., is used to taking heat. He was briefly kidnaped in 1990 in a bizarre incident shortly after leaving Wells Fargo to take over at the Minneapolis institution. That was only weeks after his daughter Karen was shot seven times by a deranged gunman while she attended UC Berkeley.
And there were the verbal slings and arrows he suffered from many of the 2,000 workers he laid off at First Bank System, victims of his do-or-die cost-cutting measures to save the then-troubled bank. Those measures were ultimately successful and Grundhofer now is credited with saving the Minneapolis bank from disaster.
But Los Angeles-native Grundhofer, 56, cut his banking teeth in Southern California as a Union Bank executive, rising from a credit analyst to Southern California regional manager. It was there that he worked with future Wells Fargo Chairmen Carl Reichardt and Paul Hazen, forging lasting connections.
In fact, Grundhofer recently described Reichardt as the mentor who gave him his first banking break in 1968 by making him manager of Union Bank’s Newport Beach branch. Reichardt, who then headed Union’s Southland region, retired last year as Wells Fargo chairman and was succeeded by Hazen, another longtime friend.
In 1978, Grundhofer followed Reichardt to Wells Fargo, joining it as the Southern California retail banking chief. He rose to vice chairman before leaving in 1990 when it became clear that Hazen would be Reichardt’s successor at Wells Fargo. He grabbed an offer to rescue First Bank System.
Grundhofer expresses near-reverence for Reichardt, who taught him the banking basics. They still hunt together in Northern California and play golf in the Indian Wells area, where both have homes. When Grundhofer’s daughter was shot--she has fully recovered from her wounds--Reichardt was there as a friend offering help and sympathy.
“Carl took a chance on me, and that started my career,” Grundhofer said in a 1994 interview. “When Carl believed in you, he gave you a lot of rope and let you do your thing. But he expected results. You have to earn what you get. You aren’t entitled to it simply because you have a job.”
Banking must be in the Grundhofer genetic code. His brother Jerry is chief executive of Star Banc Corp. of Cincinnati, another major bank holding company. Jerry also worked at Wells Fargo before moving to Security Pacific, where he rose to president before leaving to take over at Star Banc.
Grundhofer needed all the skills he could muster at First Bank System in January, 1990, when losses and bad loans threatened to submerge the $20-billion bank. And he wasted no time in applying what he’d learned.
In his first year at the Minneapolis bank, he laid off 2,000 of 12,000 employees, replaced 19 of the bank’s 20 top managers, trimmed assets by $3 billion and cut expenses by $100 million, eliminating everything from potted plants to newspaper subscriptions.
And he managed to raise $170 million in equity capital when the bank’s future was seriously in doubt.
The bank almost immediately righted itself, though not without tremendous pain, earning Grundhofer plaudits throughout the industry. Now the bank is back in a growth mode, with $37.3 billion in assets and 350 offices in 11 states, mainly in the Midwest. The bank has grown through myriad acquisitions and posted a profit of $420 million for 1994.
“He spilled a lot of blood on the floor, but it had to be done. He’s done a good job,” said Bert Ely, an Alexandria, Va.-based consultant.
In the event his bank merges with First Interstate, Grundhofer would almost certainly cast the same cold eye on cutting costs as he did when he took over at First Bank System, despite the hopeful assurances Monday that the companies would minimize the pain of consolidation.
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Bio: John F. Grundhofer
Title: Chairman and chief executive of First Bank System Inc.
Age: 56
Birthplace: Los Angeles
Education: Bachelor’s degree in economics from Loyola Marymount University in Los Angeles; MBA in finance from USC
Family: Married, two daughters. Brother Jerry A. Grundhofer is CEO of Star Banc Corp. in Cincinnati.
