Large-scale layoffs seem all but certain in the months ahead for Great Western Financial Corp., which is currently the subject of two competing takeover bids from rival suitors Washington Mutual Inc. and H.F. Ahmanson & Co.

But despite the potential for major job reductions, Great Western continues to hire new employees and will keep doing so when "critical positions" become open, said a company spokeswoman.

That practice could prove costly to the suitor that eventually acquires Great Western and especially to Ahmanson since Great Western adopted a lucrative severance package for all employees shortly after Ahmanson's initial takeover bid in February.

Under the current package, all full-time Great Western employees regardless of their length of service will receive a minimum six months' severance pay if they are laid off. High-level employees fare even better, with senior vice presidents receiving a minimum of two years pay and first vice presidents receiving a year and a half.

Thus, senior vice presidents such as David Imig and Lawrence Spera, who were both hired by Great Western within the last three months, will each receive the full two years' severance if they are laid off after a merger.

The continued hiring comes as something of a snub to Ahmanson, which had advised Great Western to institute a hiring freeze in order to minimize the magnitude of layoffs if the two institutions end up merging.

Furthermore, Ahmanson would likely be hit harder than Washington Mutual would by the recent new hires in the event of a successful acquisition of Great Western.

That's because Ahmanson unlike Washington Mutual has considerable overlap with Great Western's service area, which would translate to more job redundancies and, thus, necessitate more layoffs.

Ahmanson, through a direct solicitation of Great Western shareholders, had been pressing to force Great Western to hold its annual shareholders meeting by May 6. However, as of late last week, Ahmanson appeared not to have received the requisite majority of votes to force the meeting. Great Western has scheduled the meeting for June 13.

Some analysts defended the continued hiring, saying that Great Western must keep filling key spots and conduct its business as usual in the run-up to an eventual acquisition.

"The fact is, they continue to expand their business and need to fill those positions," said Joe Morford, an analyst with Alex. Brown & Sons.

Morford agreed that Ahmanson could be forced to eliminate more of the new positions than Washington Mutual if its bid is successful because of the higher overlap issue.

Prev

For reprint and licensing requests for this article, CLICK HERE.