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[Newspaper Article follows]
THE KANSAS CITY STAR
April 25, 1996, Page A-1
Utility denies talk of layoffs
Western Resources chief says 531 jobs would be lost to attrition
after KCP&L merger.
By Martin Rosenberg, Staff Writer
Western Resources Inc., which had promised that no layoffs would
occur after a merger with Kansas City Power & Light Co., says in
a regulatory filing that it intends to cut 531 positions in the
merged company.
KCP&L contends that its work force would bear the brunt of the
job reductions.
"Don't make a point about `no layoffs' when you're going to be
reducing 531 jobs," Turner White, KCP&L senior vice president,
said Wednesday. "This is one of those empty phrases that has
become meaningless."
The Topeka-based Western Resources maintains the job cuts would
be in both companies and would be accomplished through attrition,
such as retirements, not through layoffs.
Western Resources Chairman John E. Hayes Jr. reiterated Wednesday
that his company is committed to no layoffs. He gave the same
assurances at two recent news conferences, and the company is
vowing "no layoffs" in full-page newspaper ads.
"We'll take advantage of attrition and growth," he said. "We're
a growing company. It is a growth story. Period."
He also downplayed several conflicting statements he has made
about potential savings and employment levels that would result
from his planned hostile takeover of Kansas City-based KCP&L.
Some of the confusion, he said, stems from a preliminary study of
the merger and his own incorrect statements about job figures in
a report by the Deloitte & Touche Consulting Group done for
Western Resources.
Western Resources is trying to derail KCP&L's planned merger with
UtiliCorp United of Kansas City with a $1.7 billion bid for
KCP&L.
KCP&L and UtiliCorp have said their deal would result in the
elimination of 200 positions over 10 years.
The issue over lost jobs arose when three locals of the
International Brotherhood of Electrical Workers representing
KCP&L employees wrote their members this week that Western
Resources' April 15 filing with the Kansas Corporation Commission
"reports 531 jobs will be severed at the time of the merger."
"This comes just a week after publicly stating there would be no
layoffs," the locals' leaders wrote. The unions urged their
members to support the KCP&L merger with UtiliCorp.
The issue is further clouded by inconsistencies related to the
savings Western Resources expects after the merger.
Central to Western Resources' offer of roughly $28 a share to
KCP&L shareholders has been its claim that the combination would
generate $1 billion in savings over 10 years.
However, in a May 1995 letter to KCP&L Chairman Drue Jennings,
Hayes predicted that a Western merger with KCP&L would produce
savings of $500 million over 10 years.
In a news conference Monday, however, Hayes mistakenly said the
letter predicted the $500 million would be saved over five to
seven years. At the news conference, he was trying to explain
how the estimates of the potential savings had doubled since last
May.
Asked about the inconsistency on Wednesday, Hayes said, "It
doesn't matter because it (the letter) was a preliminary
analysis."
The $1 billion savings estimate was generated by a study by the
Dallas office of Deloitte & Touche. Western Resources has
included the consultants' report in its filing at the KCC.
The study also identified the 531 jobs that would be eliminated
through the merger, including 75 in finance, accounting and
planning, 77 in administrative and support functions, 75 in
customer service, marketing and sales, and 75 in electric
transmission and distribution.
Deloitte & Touche stated that Western Resources and KCP&L now
have a combined work force of 7,267.
On April 14, when he announced his offer to merge with Western,
Hayes said that after the merger the company would employ
"approximately 6000."
If the merged company employs 6,000 the total number of positions
to be eliminated would be 1,267.
On Wednesday, Hayes backed away from the prediction of a merged
work force of 6,000.
"I probably misspoke," he said.
He said the Deloitte Touche employment figure -- 6,736 after the
reduction of 531 -- is more accurate.
There is also a question which company would suffer more from
layoffs. Experts familiar with corporate mating rituals say that
in a hostile takeover, the bulk of the job cuts hit the company
taken over.
Thomas DiLorenzo, professor of economics at Loyola College in
Baltimore, said that in a hostile merger the acquiring company
usually believes the acquired company has been poorly run.
"A lot of times, the job loss is in the top management of the
acquired firm," he said.
After Kansas Gas and Electric was taken over by Western
Resources, employment in its downtown Wichita headquarters fell
from 500 to 200, according to a recent article in The Wichita
Eagle.
Hayes disagreed with the article.
"We have practically the same number of employees in Wichita as
before the merger," Hayes said.
Whether or not workers ever are fired, the job disruptions
associated with utility mergers can be painful.
According to 1992 articles in The Eagle, "KG&E and KPL (Western
Resources) promised that there would be no layoffs because of the
merger. And technically, there were not. But this doesn't mean
that people didn't lose their jobs....
"The changes are clear at KG&E's headquarters. When the merger
was announced, KPL said the headquarters would remain in Wichita.
This was somewhat misleading. Technically, KG&E's operating
division has its headquarters in Wichita. But the power, the
purse strings and the people are in Topeka.
"The merged company moved 171 employees including almost all of
the senior managers to Topeka. Most of them were high-paying
jobs; a former employee estimated that the average salary was
$40,000 to $445,000 a year.
"About 250 employees now work at KG&E's headquarters in downtown
Wichita, half the number before the merger. Two floors of the
building are empty."
However, Hayes is sticking to his position that in his deal with
KCP&L the job losses would be shared. "It will affect both work
forces...and I expect somewhat evenly. We would work with KCP&L
management on how to effectively redeploy the combined
functions."