If your mother says she loves you, aspiring journalists are often told, don’t take her word for it. Check it out. Investors would do well to treat announcements from Charlotte-based Wachovia Corp. with similar skepticism. In April, the bank cut its dividend by 41% — after executives promised it wouldn’t. In May, it stripped Ken Thompson, 57, of his chairman role in response to the the bank’s $350 million first-quarter loss and alleged regulatory indiscretions. That left him free, so he said in official statements, to devote more time to fixing the company. Less than a month later, the board announced that his time had run out and handed his other title, CEO, to Lanty Smith, who had been a Wachovia director for more than 20 years and chairman for a month.
Repeatedly contradicting oneself is rarely a good strategy, and it’s particularly risky for a bank trying to weather choppy economic seas. “They have to stop reversing themselves on major decisions like this,” says Tony Plath, associate professor of finance at UNC Charlotte, “or they’ll lose all credibility.” What’s left is pretty shaky. Following news of Thompson’s forced retirement, Wachovia’s shares — already worth less than half what they were a year earlier — slid to a 13-year low. Some analysts predicted disastrous second-quarter earnings would follow.
So what can the country’s fourth-largest bank do to redeem itself — aside from eschewing promises it can’t keep? For one, it must move quickly to find a replacement for Smith, who has passed his 65th birthday and holds down another full-time job as CEO of Tippet Capital LLC, a Raleigh merchant banking firm. “Now is not the time to be operating with an interim CEO for an extended period of time,” Plath says.
When the board dumped Thompson, Smith tried to assure shareholders. “The board is confident that we are putting in place the right interim leadership to move the company forward, and no other senior management changes are currently contemplated.” Maybe some should be. And given the recent track record, maybe some already are. Maybe the board should glance in the mirror and shake things up. After all, Thompson didn’t run the bank in a vaccum. The board approved his actions, including the ill-timed $24 billion purchase of mortgage lender Golden West Financial in 2006. One of the harshest criticisms came from Richard Bove, an analyst with New York-based Ladenburg Thalmann & Co. And it wasn’t aimed at Thompson: “This can only happen in a company whose board has totally lost touch with reality.”
LINCOLNTON — Crate & Barrel will add 220 jobs at its distribution center during the next five years. The Northbrook, Ill.-based retail chain employs about 65 here. Plans call for a $23.5 million expansion of the three-year-old warehouse from 210,000 square feet to 600,000.
CONCORD — Marcus Smith, 35, was named general manager of Lowe’s Motor Speedway and chief operating officer of Speedway Motorsports, which owns Lowe’s and six other racetracks. He’s the son of Speedway CEO Bruton Smith and replaced H.A. “Humpy” Wheeler, 69, who retired.
CHARLOTTE — Wachovia agreed to sponsor its namesake PGA Tour event through 2014. Terms weren’t disclosed. The four-year extension was announced before the ouster of former CEO Ken Thompson.
CHARLOTTE — Doctors who work for Carolinas HealthCare System may no longer give patients free samples of medicine. CHS wants to lessen the influence of drug companies on doctors.
KANNAPOLIS — N.C. State University hired University of Illinois scientist Mary Ann Lila, 52, to lead its efforts at the North Carolina Research Campus. She starts in August. The N.C. State Fruit and Vegetable Science Institute will try to develop more-nutritious food.
CHARLOTTE — Carolina Panthers wide receiver Steve Smith bought nearly half of Velocity Sports Performance. It provides specialized training to improve athletes’ agility, speed, strength and resistance to injury. The amount of his investment was not disclosed.
STATESVILLE — New York-based Kooks Custom Headers plans to move its headquarters and production here by the end of the year. It will employ about 55 making exhaust systems for automobiles.
CHARLOTTE — The state Utilities Commission rejected Duke Energy’s request to add a special drought fee to customers’ bills, saying drought-related costs are a normal business risk. Duke wanted to recoup $20 million it spent on an option to purchase power from Columbia Energy in case the drought forces it to cut production at its hydroelectric plants. The fee would have added about $5 to the average annual residential bill.
SHELBY — Philips Lighting of Somerset, N.J., plans to add at least 50 jobs here, nearly doubling employment, during the next three years. It also will spend about $2 million to renovate its 120,000-square-foot factory.
CHARLOTTE — Charlotte Knights won’t play baseball in a downtown stadium until at least 2010. The minor-league team, which now plays in Fort Mill, S.C., had hoped to move in next season but can’t because of lawsuits challenging the project. It also hadn’t come up with the money to pay for the stadium.
CHARLOTTE — Steelmaker Nucor will pay about $658 million for half of Duferdofin-Nucor, a joint venture with Swiss steelmaker and trader Duferco. It will produce steel beams in Italy and distribute them in Europe and North Africa.
CHARLOTTE — Krista Tillman, 54, took over as dean of undergraduate evening programs at Queens University. She was president of BellSouth in North Carolina but retired last year after the Atlanta-based company was sold to AT&T.
MATTHEWS — PokerTek, a maker of electronic poker tables, agreed to supply a 12-table game room at Trump Plaza Casino in Atlantic City, N.J. Terms weren’t disclosed. If approved by state regulators, it will be New Jersey’s first automated poker room. The goal is to boost casino revenue by increasing hands per hour and reducing labor costs.
CHARLOTTE — Bank of America paid $1.9 billion to increase its stake in China Construction Bank to nearly 11%. It bought 9% for about $3 billion in 2005.
TAYLORSVILLE — Piedmont Fiberglass will move here from Statesville within two years and add 25 employees, bringing the total to 75. Executives say it needs more room to make church steeples, baptismal pools and boat parts.