For single-sponsor credit unions, receiving the strong support and identity of the sponsor company and maintaining close ties with it can be a major boon-and a double-edged sword.
Case in point: Motorola Employees CU and its single sponsor, Motorola. The huge, multi-national company just announced it will lay off another 4,000 workers, bringing the total layoffs announced since Jan. 1 to 22,000.
"That's part of being a single-sponsor credit union. You don't have the diversity in your field of membership, so when something happens at the sponsor company, you're going to feel it," Fiore stated. "When they've closed down operations, we've had to close down our branch offices. Five years ago, we had 25 branches, now we have 16. But the good news is, we have more members today than we did five years ago."
With a large, worldwide company like Motorola, even the cutting of 22,000 jobs is somewhat diluted from the credit union's perspective. Some of those jobs will be out of the country and therefore won't affect MECU much. In other cases, the company will be cutting one sort of position but filling another, , which mitigates the initial losses, as well.
Fiore said whenever job cuts are imminent, MECU anticipates a number of difficult trends, including rising delinquencies and bankruptcies-in part due to its ties to its sponsor.
"Sometimes (the increase in delinquency and bankruptcy) is because people really can't pay; other times it's because they're mad at the sponsor and, let's face it, our name has their name in it," he related. "If they're mad at the sponsor, they'll often hold that against us, too."
Another troublesome trend: members who lose their jobs often leave the credit union.
"It's a little easier for us now that we have once a member, always a member. We didn't have that 10 years ago, and we would have to close out all accounts once a member separated from Motorola," he said. "Even with once a member always a member, however, it's not easy keeping those people on. We're lucky if we retain 25% of those laid off immediately following the cuts, and then members continue to drop off from there. We're just no longer convenient to them."
Turning To Electronic Delivery
Still, MECU tries to get the word out to its members that they are members for life, even if they don't stay with Motorola . It promotes electronic delivery channels as a way of staying with the credit union. "It's a pretty hard sell, especially people who are used to just going right in to the branch on-site, and especially if we're talking about some of the manufacturing people who aren't used to working on a computer," Fiore noted. "But we try to point out that this is one benefit Motorola provided that they can keep."
MECU avoids using direct mail or other traditional marketing measures to get this word out, because it typically has no way of knowing which of its members are about to get the ax. But as work sites are identified as being targeted, the on-site branch staff do their best to reach out to the members there, Fiore commented.
The credit union participates in Members Financial Services, so it is able to offer some financial planning to its members, many of whom may use their 401(k) accounts to pay off loans in the event they are laid off.
And of course, being prepared is essential, and to do that means keeping ties to the sponsor nice and tight. "You have to have a real close relationship with the sponsor like we do," Fiore observed. "We receive quarterly reports on earnings, and sometimes we have someone from Motorola come in and actually present that information to the credit union staff. Our board is comprised of employees of the company, so we keep in touch that way, too, of course. We try to get high-level people on the board, too."
As for the future, Fiore is hopeful that there aren't more job cuts in the offing at Motorola. "What I'm hearing is that [once these cuts are implemented] things will slow down and level off," he said. "We just have to ride this cycle down until it's time to swing back up again."
