Bloomberg News

Main Street CEOs Hiring Marks Davos Divergence as Banks Cut

February 02, 2012

(Updates with employment estimates in ninth paragraph. See DAVOS <GO> for more on the World Economic Forum.)

Jan. 30 (Bloomberg) -- As chief executive officer of a maker of spark plugs and wiper blades in the Detroit area, Jose Maria Alapont has struggled through the kind of collapse that few have experienced.

His company, Federal-Mogul Corp., spent six years in bankruptcy, slashing debt and jobs, to emerge just before auto sales plunged and some of its biggest customers, General Motors Corp. and Chrysler LLC, also sought protection from creditors. With financial-services firms facing an upheaval of their own, Alapont says he can relate, yet he no longer shares the concern.

“I know what that is like when your industry is hurting, but now we project growth for the third straight year and are hiring,” said Alapont, who attended the World Economic Forum in Davos, Switzerland, last week. He joined CEOs from Humana Inc. to Tibco Software Inc. in outlining plans for job growth at the same time Wall Street executives including Morgan Stanley CEO James Gorman discussed ways to cope with a shrinking industry.

In a twist on U.S. job creation, manufacturers such as Federal-Mogul, and companies in Main Street industries such as retail and health care, plan to hire tens of thousands of workers this year, while financial firms such as Bank of America Corp. add to more than 238,000 announced job cuts globally in the past 12 months.

‘Secular Change’

Banks are getting left behind as U.S. companies prepare for a recovery at home, with gross domestic product climbing at a 2.8 percent annual pace in the fourth quarter, according to Commerce Department figures released on Jan. 27. Job cuts in financial services may signify a permanent contraction as banks see limited growth opportunities in the face of new restrictions on their trading desks and higher capital requirements.

The financial-services industry accounted for about 5.8 percent of U.S. jobs last year, the lowest level since 1981, according to data compiled by Bloomberg. The percentage peaked in 1986 at 6.2 percent, the data show.

“There is a secular change taking place across Wall Street when you think about it broadly, particularly in the mature markets,” Gary Parr, a New York-based vice chairman at Lazard Ltd. who specializes in advising financial companies. He said he anticipates there will be fewer financial-services jobs at the peak of the next economic cycle in a few years.

Gloom Myth

Hiring in the rest of the U.S. signals that companies are starting to put a dent in the unemployment rate, which dropped to 8.5 percent in December, the lowest level in almost three years. Private-sector employment rose by 1.92 million jobs last year, led by jobs at health-care companies, retailers and manufacturers, according to the U.S. Bureau of Labor Statistics.

Employers probably added workers to payrolls in January, according to the median forecast of 68 economists surveyed by Bloomberg News. The government is scheduled to release those figures on Feb. 3.

Deloitte LLP, the U.S. provider of accounting and consulting services for industries ranging from consumer products to utilities, has a 12-month plan to hire 18,000 workers that should be completed by the middle of this year. CEO Joe Echevarria said his clients expect slow, steady economic growth to boost their earnings, potentially leading to increases in capital spending and hiring.

“Hiring in the United States is a good bet,” Echevarria said. “I don’t buy the gloom and doom.”

More Jobs

Humana, the second-largest Medicare provider in the U.S., added about 2,000 employees in the last year in cities like Louisville, Kentucky; Green Bay, Wisconsin; and Cincinnati, CEO Michael McCallister said in an interview at Davos.

Gregory Lucier, CEO at biotechnology company Life Technologies Corp. who also attended Davos, said he is hiring about 500 people in the U.S. this year in places including Austin, Texas, and another 500 in China. Life Technologies is based in Carlsbad, California.

While the U.S. economy expanded less than forecast in the fourth quarter, the growth was the fastest since the second quarter of 2010, showing that the world’s largest economy has so far withstood the effects of the debt crisis in Europe.

Alapont, Federal-Mogul’s CEO since 2005, added about 2,300 workers globally last year, including almost 900 in North America, for a total of 45,000 employees worldwide. He plans a similar increase for 2012, he said in a Jan. 19 interview.

“We expect to see double-digit growth again this year” in sales, Alapont said, who cut 11,500 jobs in 2008 and 2009. “And if we get to our expectations, we will keep hiring.”

Sales Growth

Revenue at companies in the Standard & Poor’s 500 Index increased 11 percent on average in the most recent quarter available, compared with 4.3 percent growth a year earlier, data compiled by Bloomberg show.

With banks freezing hiring, there also is less competition for top talent, according to Vivek Ranadive, CEO of Tibco Software, which makes products to help companies like Lockheed Martin Corp. and Delta Air Lines Inc. run operations. The Palo Alto, California-based company plans to hire 500 people in the U.S. this year as the economy improves and Europe works out its debt crisis, Ranadive said.

“We are hiring quite rapidly now, all in sales and service,” Ranadive said in an interview in Davos. He wants to recruit workers from U.S. colleges such as Stanford University and the Massachusetts Institute of Technology. “It’s like a well-kept secret that the U.S. is doing better.”

‘Relatively Optimistic’

Among U.S. technology companies with a market value of more than $100 million, almost 50 increased employment by more than half in the most recently reported two-year period, according to data compiled by Bloomberg. Apple Inc., Google Inc. and Amazon.com Inc. were among the companies that made a hiring push, the data show.

Technology and industrial companies are “relatively optimistic,” Parr, the Lazard banker, said in Davos. He said today’s biggest banks will probably not get any bigger.

Manpower Inc., the largest U.S. provider of temporary staffing, is seeing that trend as it assists financial-services workers in seeking new jobs and preparing resumes, said Jeffrey Joerres, the Milwaukee, Wisconsin-based company’s CEO. Financial firms have the most people in need of so-called outplacement services, he said.

“The real economy in the United States is hiring,” said Stefano Aversa, co-president of consulting and advisory firm Alix Partners, in an interview at Davos. “It is the financial institutions that are struggling now.”

--With assistance from Alexandre Tanzi in Washington, Tom Keene in New York and Christine Harper in Davos, Switzerland. Editors: Jennifer Sondag, Kevin Miller

To contact the reporter on this story: Jeffrey McCracken in Davos, Switzerland at jmccracken3@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net


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