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The Vivendi Deal

NBC Chairman Visits Universal to Calm Fears

The studios' executives know cuts are inevitable after a merger

September 04, 2003|Richard Verrier and James F. Peltz | Times Staff Writers

In his first encounter with a roomful of senior vice presidents at Universal Studios, NBC Chairman Bob Wright decided to lighten things up.

Alluding to parent General Electric Co.'s reputation for fiscal austerity, he told the crowd of nearly 200 who gathered Wednesday at Stage 6: Turn off your cell phones and pack up your computers because the buses are waiting outside.

Laughter filled the room -- but it was clearly nervous laughter for some.

"What's the one thing on everyone's mind?" said a manager who attended Wright's presentation. "They're talking about cost savings. You've got to be nervous."

Vivendi Universal announced Tuesday that it had agreed to enter into exclusive negotiations with GE to create a multibillion-dollar entertainment giant that would combine Universal's film, TV and theme park group with NBC and its cable channels.

Although a deal is not certain, the two sides are determined to make it a reality. "It's unlikely anything will happen that will prevent a closing," Wright said in an interview at NBC's West Coast headquarters in Burbank, several hours after he addressed the troops at Universal.

He was joined by the equally upbeat Jean-Bernard Levy, chief operating officer of Vivendi, who said he expected to finalize the transaction by the first quarter of next year.

"We've been vindicated," Levy said. "People said, 'The process is long. The process is lousy.' The critics are not justified. In four months, we delivered one of the largest deals of the year and at the price we wanted."

Among the roughly 7,000 employees at Universal Studios, however, the prospect of a marriage with NBC has brought mixed reactions.

While many are relieved that Vivendi's marathon auction for its entertainment assets is nearing an end, there is widespread anxiety over what NBC and its famously cost-conscious corporate parent have in store for them. "Everyone is thinking 'What about me?' " one executive said.

Wright and Levy spoke to the executive staff in the hopes of mollifying fears that widespread layoffs are in the offing. He praised their contributions for delivering a strong summer at the box office, touted the complementary nature of the two companies and indicated that there are no plans to bring wholesale changes to the studio.

"You want to protect the businesses," Wright said in the interview. "Our objective is, we don't want to slow down production."

Wright said NBC had identified about $200 million in cost savings that it could achieve by combining with Universal. But Wright dismissed speculation that there would be sweeping job cuts. Most of the savings, he indicated, would come from steps such as squeezing money out of vendors that want to sell supplies to the new operation.

"It's not obvious that it's going to come from people being fired," Wright said.

Studio chief Ron Meyer, who joined in Wednesday's meetings, also sought to reassure the ranks, stressing that no decision had been made on job cuts.

As for Wright's dark humor, Meyer said, "It was such an obvious joke, I can't imagine anyone would be sensitive to it."

Yet sensitivities are understandable given that most mergers produce job cuts.

Walt Disney Co., for example, slashed about 300 jobs at Fox Family's cable headquarters in Westwood last year, a few months after buying the cable channel in a $5.2-billion deal with News Corp. and Saban Entertainment.

Despite Wright's assurances, Universal executives expect layoffs and cost savings to occur mostly where their operations mirror NBC's, notably in corporate and back-office functions. The biggest overlap is in Universal's television group, where executives expect deep cuts in their workforce of 1,000.

GE's history shows that Universal's employees can't be complacent.

Under former Chief Executive Jack Welch and now his successor, Jeffrey Immelt, GE is nothing if not ruthless when it comes to slashing costs -- including jobs -- to strengthen its panoply of businesses. Typically, the cuts are aimed at layers of middle managers that GE finds inefficient.

Welch, whose mottos included "fix, close or sell," became legendary for axing more than 100,000 jobs through layoffs, forced retirements and divestitures. Immelt, too, is bent on reducing costs and improving productivity, especially by slashing back-office and administrative jobs whose functions can be replaced with technology, notably the Internet.

For example, the Fairfield, Conn., company cut 7,000 workers last year from its giant GE Capital Services unit -- a financial services behemoth that GE built up with acquisitions -- as part of a program to eliminate $1 billion in annual expenses.

GE, whose worldwide workforce is now slightly above 300,000, also has reduced its jet-engine workforce by about 4,500, or 15%, to survive the sharp travel slowdown.

Separately, in Wednesday's interview, Wright indicated that NBC had no immediate plans to sell Universal's theme park group. NBC is said to have little appetite for the cash-intensive theme park business, which is going through an industrywide slump. But it appears willing to wait until it can find the right buyer.

Wright also said he expected Vivendi would enter into talks with former Vivendi Universal Entertainment Chairman Barry Diller in the next several weeks. Diller and his company, InterActiveCorp, loom large because of a host of potentially costly restrictions that InterActive holds on the Universal assets.

Diller -- whose company could walk away with $1 billion or more as a byproduct of the NBC-Universal merger -- said he supports the proposed deal.

"NBC is an excellent company with excellent management," he said.

Times staff writers James Bates, Sallie Hofmeister and Meg James contributed to this report.

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