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American Express Rallies Under Golub; Battles Loom : Management: The new CEO came to power when market loss and other problems toppled his predecessor.

September 27, 1993|ROB WELLS | ASSOCIATED PRESS

NEW YORK — Make no mistake. The Harvey Golub era is under way at American Express Co.

Consider these changes since the gruff-talking native of Brooklyn took over American Express earlier this year from James D. Robinson III, aristocratic scion of a Georgia banking family:

*American Express sold its Shearson Lehman Brothers brokerage to Primerica Corp. for $1 billion.

*The company's trademark green and gold charge cards, once a badge of prestige, are now accepted at Kmart.

*Advertisements that once wooed customers with testimonials from the likes of Mikhail Baryshnikov and Thomas P. "Tip" O'Neill now bluntly attack American Express' main rival, Visa International.

*New management is in place, including the promotion of an African-American executive to one of the company's most powerful positions, a rarity on Wall Street.

Just last year, American Express was suffering a torrent of bad publicity under Robinson, the former chairman and chief executive who was forced to resign in January after leading the company for 15 years.

A large slippage in market share, an embarrassing merchant revolt against high charge card fees and poor earnings figured into Robinson's ouster.

Golub has brought stability to American Express, according to 20 executives and industry observers interviewed for this article. Known for a brusque manner and strong managerial skills, Golub has impressed stock market analysts, many of whom recommend American Express as a turnaround prospect. The company's stock has risen more than 30 percent this year, to around $34 a share.

Golub even has won respect from the enemy.

"I certainly give Harvey credit for going in and taking out the costs," said Bradford W. Morgan, a Visa executive vice president. "They seem to be looking at the market more realistically, rather than viewing life through their own press releases."

The change in tone is readily apparent at American Express, a company that once spent millions to craft a corporate culture of class privilege. Its board of directors still reflects that eliteness, with luminaries ranging from Henry Kissinger to opera singer Beverly Sills.

Golub has taken aim at the snobbery in the company's charge card and travel business, known as Travel Related Services, and is focusing on customers' needs.

"There was, in fact, an exclusional arrogance in TRS and there was a culture that made it very difficult to face reality, face facts," Golub said in a gravelly baritone as he smoked a cigarette during an interview. "I would not say that all of the changes from those perspectives are due to me. But they were certainly added to by my being there."

Despite the positive reviews, American Express still faces a tough battle against a rapidly growing army of new credit cards from banks and corporate titans like General Motors and Sears.

Consumers continue to drop the American Express charge cards -- 2.5 million defections since 1990, while Visa added 49 million cards in the same period. The card's $55 annual fee may be too expensive for today's consumers, who favor plastic money with spending-linked incentives such as discounts on a new car, analysts say.

"American Express has had a lot of bumps in the road and I think they are starting to turn around," said Michael Auriemma, managing consultant at Auriemma Consulting Group in Westbury, N.Y. But, he adds, "I wouldn't call it a drastic turnaround."

Many analysts say Golub, 54, is up for the challenge. His rise to the top of one of the world's best recognized financial services companies, however, was atypical.

At 19, he flunked out of Cornell University, where he was studying veterinary medicine. He then attended New York University and obtained a bachelor's degree in management in 1961.

Golub's career rise began in earnest when he joined a well-regarded consulting firm, McKinsey & Co., in 1967. He worked there for 16 years, except for a break in the mid-1970s to run an air freight company.

While working with American Express as a consultant, he recommended the company purchase Investors Diversified Services Inc. of Minneapolis, now known as IDS Financial Services, a money management and financial planning firm that specializes in retirement investment plans.

American Express acquired IDS in 1984 and installed Golub as president and chief executive officer. He quickly made his mark.

IDS grew at a 22 percent annual rate from 1984 to 1992 and now accounts for 27 percent the company's profits. In 1989, Robinson asked Golub to spend more time in the New York headquarters to work on finance and strategic planning and spread his ideas generated at IDS throughout the company.

The IDS experience gave Golub another advantage: a geographic and emotional separation from the growing problems in the New York headquarters, which helped him push reforms.

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