Wednesday, December 5, 2012

With Executive Bonuses Threatened, Citigroup Cuts 11,000 Workers to Save Leadership Jobs

SAN NARCISO, Calif. (Bennington Vale Evening Transcript) -- Amid the economic showdown between congressional Republicans and the White House, in which President Obama has taken a more hardline stance against negotiating than in times past, most Americans are preparing to tighten their belts should the government fail to prevent a dive off the fiscal cliff. Businesses too are taking precautions. Citigroup, which never fully recovered from the financial crisis, announced Wednesday that it would cut 11,000 jobs -- about four percent of the 262,000 employees in its global workforce. Former CEO Vikram Pandit had hired thousands of workers and invested billions to boost the company's revenues when the economy soured in 2008. New CEO Michael Corbat, who succeeded Pandit after his October 16 ouster, seems to have a much different plan. Corbat expects the deep cuts to save Citigroup $900 million next year, and more in subsequent years. "Because of Pandit's prodigal spending and misguided decision making, Citigroup now faces the prospect of having to withhold over $100 million in executive bonuses," said Len Waybill, head economist for the conservative Peter Pinguid Society. "In order to keep the company running, it can't afford to lose its leadership. So sacking thousands of low-level peons makes sound business sense. I don't see Corbat having any other choice."

Nearly 2,000 layoffs will occur within the institutional clients group, of which investment banking is a part. The rest of the jobs will likely be eliminated in technology and operations divisions.

"Moving jobs to what Corbat called 'lower-cost locations' will be integral to the plan," Waybill noted. "So, I'm guessing he expects to lose even more employees through attrition when he tells them they'll have to leave the well-to-do suburbs and bedroom communities for offices in low rent districts downtown...or the slums."

Citigroup also plans to capitalize on automation technologies to replace expensive and inefficient workers with computers.

"There's a huge misconception about the importance of frontline workers," Waybill explained. "Part of that myth has been promulgated by unions. Employees also perpetuate the fallacy by describing themselves as cogs in a big corporate machine. But the reality is that cogs are expensive and difficult to replace. And they turn a lot smoother with a machine at the controls, not a supervisor who needs medical benefits and days off and breaks."

The 11,000 employees on the chopping block are simply not vital to the survival of Citigroup, in Waybill's estimation.

"Consider for a moment that we accept their 'galley slave' metaphor," he offered. "Sure, those slaves man the oars and power the ship, but without a strong captain and able officers at the helm, that ship won't know where to go. The galley slaves will simply propel it onto the rocks and scuttle it. The same applies at Citigroup. They need highly compensated executives to guide the ship. Any moron can row, if you know what I mean. But Citi can't afford to cut the fat from the top. So, those executive bonuses must happen."

When asked about the impact the layoffs would have on unemployment numbers, Waybill scoffed: "I hear Starbucks is opening 1,500 new cafes. I'm sure some IT guy with a pedigree like Citigroup can easily land a job as a barista. Plus, it's Christmastime. Seasonal jobs are flourishing now, and more companies are in hiring mode. Honestly, canning these people right before the holidays demonstrates a level of humanity in Corbat that other CEOs seem to be lacking."

(c) 2012. See disclaimers.

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