WaMu employees' pensions fate unclear; many to lose jobs

Washington Mutual employees will not find out for another two months whether they have a job and the fate of their pensions remains unclear, according to a JPMorgan Chase executive who spoke to employees from both companies in a frank, hourlong conference call Thursday.

JPMorgan (NYSE: JPM) also plans to rebrand WaMu branches across the country with the JPMorgan Chase name, said Charlie Scharf, head of JPMorgan Chase???s Retail Financial Services group.

WaMu employs about 43,000 employees nationwide ??? including 3,500 in downtown Seattle ??? and JPMorgan Chase has about 195,600.

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Scharf, who spent a chunk of the conference call answering blunt questions from employees, said employees??? pension plans are part of WaMu???s business that???s held up in Chapter 11 bankruptcy, so it???s not JPMorgan???s responsibility to honor them.

However, Scharf said JPMorgan is attempting to transfer the pensions to his company. He also said there are plans to ???replace obligations so people don???t lose money.???

As for layoffs, Scharf said JPMorgan is taking 60 days to sort through WaMu???s organization to determine which employees it will cut and keep.

???By Dec. 1, our goal is to be able to tell everyone in the organization what the future is here,??? said Scharf. ???Unfortunately there is duplication. There will be losses of jobs. We don???t know where that job loss is and we???re going to figure it out.???

Scharf said employees will be divided into three categories: those who are laid off immediately, those who will keep their jobs at JPMorgan for the long term, and those who will be asked to stay during the transition period and then will be cut at the end.

Employees who are asked to stay through the transition period will receive a massive incentive. Not only will they receive their severance, they???ll also receive their 2008 bonus, a pro-rated 2009 bonus and an additional salary payment based on the length of the transition period.

???If the transition date is at the end of February, you???ll get an additional five months worth of salary at the end of that transition,??? said Scharf.

Employees who are laid off immediately will receive severance pay and outplacement assistance. Employees who remain long-term will receive their yearly bonuses as usual and ???we???ll have a combined incentive plan for everyone,??? said Scharf.

???We do intend to retain most of the people here,??? he said.

Several employees asked Scharf about employee equity awards that were handed out in the form of stock options.

After federal regulators took over Washington Mutual last week and sold the bulk of its operations to JPMorgan, the WaMu company???s stock plunged to 16 cents and was delisted from the New York Stock Exchange, leaving shareholders with next to nothing. JPMorgan did not assume any shareholder debt.

Scharf told employees that JPMorgan would not replace any stock awards.

???Those are worth what they???re worth,??? he said, sparking laughter. ???I???m really not trying to make light of it. It is all your money.???

Scharf said JPMorgan, which closed on WaMu???s banking operations in only 26 hours, is working to assemble merger committees with executives from both companies to work through the transition.

JP Morgan???s goal is that by the beginning of next week, the two companies will be working together. Scharf added that JPMorgan plans to be as open as possible about transition activities.

???There???s a lot more work to do,??? said Scharf. ???We???ve got to report joint earnings in about two weeks, which is kind of remarkable and difficult.???

JPMorgan Chase plans to rebrand WaMu branches with its name, largely because the new company already has such a massive advertising base and spends $2 billion a year on building its brand.

???It doesn???t make sense for us not to use the Chase name across the country,??? said Scharf.

Already, the company has made a push nationally with newspaper advertisements telling readers about the combined strength of the two companies.

That push has helped lead WaMu branches nationwide to the first net inflow of customer deposits two days ago as opposed to a net outflow that started Sept. 9. During the 10-day period before WaMu was seized by regulators, customers withdrew $16.7 billion in deposits from the bank.

Many employees were concerned that JPMorgan wouldn???t honor WaMu???s donation commitments across the Puget Sound region, particularly with the holiday giving season on the horizon.

In 2006, WaMu gave about $50 million nationwide and, of that, about $8 million went to Washington state organizations.

Scharf couldn???t say whether JPMorgan would honor all of WaMu???s commitments, including an employee donation matching program. He did point out that JPMorgan gives away about $120 million a year.

???We give away a lot of money so we absolutely believe in giving money back to the communities (where) we operate,??? he said.

Scharf said JPMorgan is working contract by contract with WaMu???s suppliers and contractors to figure out which commitments the new company will keep.

???Some of the senior people here on our side are calling the CEOs from our vendors,??? said Scharf.

One employee wanted to know whether the company would still be housed in its headquarters building in downtown Seattle. Scharf replied that he had no idea.

???We always look at real estate, but I haven???t even thought of it,??? he said. ???It???s a beautiful building, but you???re like two steps ahead of us in figuring that one out.???