200 Lose Jobs in Glendale Federal Merger; More Cuts Seen
Almost 200 people lost their jobs Friday as the $1.8-billion merger of Golden State Bancorp, the parent of Glendale Federal Bank, and First Nationwide Holdings, the San Francisco-based parent of California Federal Bank, was completed, forming the country’s second-largest savings and loan.
An additional 500 employees, almost all of them based in Glendale, are expected to lose their jobs by the end of the year, said Ken Preston, Glendale Federal’s former vice president and manager of corporate communications. Preston is among those who lost their jobs last week.
The responsibilities associated with jobs eliminated at Glendale Federal’s Glendale headquarters will be shifted to parallel positions in San Francisco.
“Of those that are leaving the company, quite a few have found new jobs,” Preston said Friday.
The layoffs are one of the ways the company says it can cut annual expenses by about $160 million during 1999.
The new company, called Golden State Bancorp, will convert all of its branches to the California Federal name beginning Nov. 16, when its customer accounts are converted to one system.
Under the terms of the deal, current Golden State shareholders will hold 57% of the thrift while financier Ronald Perelman and Texas banker Gerald Ford, CalFed’s owners, will have a 43% stake. CalFed’s management will run the institution, while Golden State Chief Executive Stephen Trafton will supervise pending breach-of-contract lawsuits against the U.S. government.
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The case is important to the company, as Golden State is expected to collect damages from the federal government for breaking a promise to let the thrift add a value for “goodwill” to their capital to balance bad loans when acquiring failing savings and loans during the S&L; crisis of the 1980s.
It is also designed as a test case that will affect 120 similar lawsuits nationwide, worth $30 billion overall. Golden State seeks $2 billion in damages.
Closing arguments in the case were heard in Washington on Friday. Although the U.S. Supreme Court has already ruled that a breach of contract occurred, the legal battle over damages continues. The Justice Department argues that the accounting changes did not hurt the thrift and may have helped it by encouraging the company to reduce its portfolio of high-risk loans.
Glendale Federal’s lawyers, however, argue that the loans were cut for general economic reasons and that the government should not get credit for those actions.
The Golden State-Nationwide merger creates a 370-branch thrift with $52 billion in assets and $28 billion in deposits. Among thrifts, only Seattle-based Washington Mutual is larger.
