WFS Financial Plans to Slash 125 Jobs

WFS Financial Inc., the Irvine consumer auto financing firm, said it will slash 125 positions, or 25% of its work force, from its operations in the central and eastern United States as it restructures to cope with soaring expenses, plummeting profits and declining revenue.

The company, which had specialized in acquiring high-risk auto loans for its investment portfolio, said it made just $300,000, or 1 cent a share, in the second quarter, down from a profit of $10 million, or 39 cents a share, a year ago. Revenue was down 31% to $43.5 million from $62.8 million.

WFS said its restructuring would result in a third-quarter charge of about $3 million. The company said the plan--which follows a similar restructuring and cost-cutting move in its western U.S. region at the beginning of the year--is designed to save as much as $10 million in annual expenses.

During the next 60 days, the company said, it will consolidate 44 offices into nine regional business centers and 11 satellite offices. With its western operations, that will give WFS 21 regional business centers and 26 satellite offices nationwide, said Joy Schaefer, the company’s president and chief executive.

The company purchases large blocks of consumer auto loans and then markets securities backed by the income expected to be generated as borrowers repay the loans.

WFS ran into trouble because of a high rate of losses from the so-called sub-prime auto loans it had acquired for its portfolio. As part of its restructuring, the company is cutting its investment on the high-risk sub-prime loans. It said that prime quality loans accounted for 70% of the loans acquired in the second quarter, up from 55% a year earlier.

For the first half of 1998, WFS recorded a loss of $13.1 million, or 51 cents a share, compared with a profit of $18.6 million or 72 cents a share for the period in 1997. WFS said its loss included $17.4 million related to restructuring of its western regional operations. Revenue for the first half totaled $81 million, down 33% from $121 million.

WFS is a publicly traded subsidiary of Irvine-based Westcorp, a financial services company that also owns Western Financial Bank.

Westcorp said Thursday that second-quarter income plunged almost 94% to $618,000, or 2 cents a share, from $9.9 million, or 38 cents a share, largely on losses from its auto loan investment subsidiary.

For the first half, the company, which also owns a savings and loan, posted a loss of $11.6 million, or 44 cents a share, compared with a profit of $17.8 million, or 68 cents a share, in the first six months of 1997.