More changes coming at USF


ANNAPOLIS -- The restructuring of USF&G; Corp., which included office consolidations and thousands of layoffs, is over. Now, the re-engineering -- with office consolidations and more layoffs -- is about to begin.

USF&G; Chairman Norman P. Blake Jr. said yesterday that he will consolidate the company's 30 field offices into no more than two large backroom operation centers and develop computer programs to replace many human underwriters.

But he said there will likely be only a small reduction in the insurer's 6,300-member work force in the just-started second phase of his planned corporate transformation.

"There will be some reduction in force, but it won't be significant," he said.

Instead, Baltimore-based USF&G; will offer training to many employees whose jobs are targeted for elimination to enable them to move into other positions at the company.

"We are not going to drop them on the street," Mr. Blake said.

After speaking at a 90-minute Forbes magazine seminar for CEOs on how to tell when you've laid off too many people, Mr. Blake said his first phase, which he called "restructuring . . . or 'Fix the Foundation' " was necessary to save USF&G; from bankruptcy.

Mr. Blake said that when he joined USF&G; in 1990, the company had 12,500 employees and was just weeks away from bankruptcy.

He pulled the company out of 13 money-losing businesses, laid off about half the work force and replaced three-fourths of the company's managers.

Five years of cutting has stabilized the company, he said. USF&G;, which lost a total of $745 million in 1990 and 1991, has become increasingly profitable on a smaller sales base. In 1994, profits rose more than 40 percent to $232 million from $165 million in 1993, while annual sales of $3.2 billion were flat from the same period a year ago.

But Mr. Blake said he's afraid those profits were gained solely by cutting and might not be sustainable. Now it is time to "re-engineer or . . . 'Build with Vision,' " he said, so that the company can grow again.

The building will be done mostly with computers to improve efficiency, speed responses and reduce costs, he said.

USF&G; probably won't expand its work force until at least 1997, when Mr. Blake said the company will be ready for his third phase, which he calls "Leveraged Leadership."

At that point, he said, he wants USF&G; to extend into profitable insurance niches around the world.

His comments came as he and other top executives gathered at the Loews Annapolis Hotel yesterday for the first Forbes CEO Forum.

Looking sunburned and cheerful, Mr. Blake told an audience that included such business notables as former Apple Computer Corp. President John Scully and convicted junk bond king Michael Milken that he and other downsizers could also upsize. Although the recent improvements in profitability have encouraged him, Mr. Blake conceded that "we still have to prove growth" by increasing sales.

Other executives on the panel weren't so sure that one person can both cut costs and rebuild, however.

Harry C. Stonecipher, president and CEO of McDonnell Douglas Corp., said he was brought in to lead the aerospace giant, which had seen its staff slashed from 130,000 to 60,000, because board members believed that only someone new could re-energize the company.

Although he said some executives may know when to stop cutting and when to start growing, he said that the reduction mania had gotten out of hand at McDonnell Douglas.

"They can't get going again. . . . They don't know when to start spending" on potential new business or improvements, he said.

Mr. Stonecipher said he doesn't believe the managers who have been reducing their departments can now enlarge them, but that he doesn't want to lay off more people. He said he is shifting managers to new jobs.

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