Comerica to Ax 1,900 Jobs in Effort to Save $110 Million

Comerica Inc. said Wednesday it would slash 1,900 jobs - 16% of its work force - in a bid to become a long-term survivor in a consolidating industry.

The Detroit-based company said the staff cuts, combined with some streamlining of procedures, would produce a pretax savings of $110 million next year.

The company, with $34 billion of assets, took a $90 million special charge in the fourth quarter to cover severance and other restructuring costs. That helped push down earnings by 43% from a year earlier, to $61 million.

Eugene Miller, Comerica's chairman and chief executive officer, said the moves were necessary to keep the company's stock price strong over the long haul.

"You're going to see more and more companies doing this," Mr. Miller said in an interview. "I think in this day and age you want to be part of the consolidation game, and to be part of that game you have to have strong currency; and currency is a strong stock price."

In Wednesday's trading, Comerica's stock was unchanged, at $56.25. The market had evidently assumed cost cutting was in store, one analyst said. The company announced last summer that it had hired a well-known restructuring consultant, Tandon Associates.

Comerica is the latest in a long string of banking companies to announce big staff cuts. KeyCorp of Cleveland, for example, said last year that it would cut 2,700 jobs, and Milwaukee's Firstar Corp. moved to cut 2,500 jobs.

Comerica acted, in part, because it hadn't achieved all the economies of scale it had expected from a 1992 merger with Manufacturers National Corp., Mr. Miller said.

The job cuts are to occur throughout the company, though Comerica said is hoping many will come from attrition. The company also plans to cut costs through such moves as streamlining credit approvals and boosting automation.

Fewer than 15 branches are to be closed throughout Comerica's bank markets, which include Michigan, California, Florida, and Texas.

Mr. Miller said he wants to maintain one of the 10 best returns on equity among the largest U.S. banks. For the first nine months of last year, Comerica had the 10th best-17.99%. Its ROE was 16.46% at yearend.

Analysts generally praised the moves.

"This is a little more than fine tuning, but it's not a blood letting," said Michael Moran, an analyst with Roney & Co. "I have a reasonable amount of comfort that the revenue picture is not going to stall," he added. "But obviously, we'll focus very, very closely on that."

Mr. Miller said he's keenly aware that job reductions can be disruptive to business.

"It's one of the things people have cautioned me about throughout this process," he said. "I feel we did not cut too deep into muscle."

Some observers maintain that the industry has gone too far in its cost cutting.

"They've managed to take out the costs-the question is whether they have the platform to generate revenues," said Charles Wendel of Financial Institutions Consulting.

Mr. Wendel, who has been analyzing bank restructuring programs for the past two years, said each major reorganization with big job cuts has resulted in the same scenario. Initial announcements produce jumps in stock price, but "over time, they do not perform," he said.

Mr. Wendel cited Firstar as a prime example of this.

Wall Street initially rewarded the stock, but Firstar struggled with revenue growth in the fourth quarter and was 5 cents shy of analysts' estimates. That led many to speculate that the Milwaukee company will soon be acquired.

But Mr. Miller said Comerica is different. "I don't think we're desperate at all, what we're doing is using this vehicle to fine tune the organization," he said.

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