With Sallie Mae town convening another round of town hall meetings (for round 1 details and a further exploration of the jobs issue, see this post) in Florida and Indiana highlighting the potential job losses at their loan servicing centers in those states, I thought it would be useful to revisit an earlier jobs announcement that Sallie Mae made in April of this year.
In early April, Sallie Mae announced to much fanfare that they would be bringing 2,000 jobs that they had offshored back to the United States. Whether the move was motivated by patriotism, a failed offshore strategy or the requirements of the Direct Lending contract, I won't make any conjecture. Accompanying Sallie Mae executives for the announcement was Rep. Paul Kanjorski who stands to gain 600 jobs at the Sallie Mae loan servicing center in his Congressional district in Pennsylvania (in case you were wondering, he was one of four Democrats who did vote against SAFRA). So, hold that thought for a moment, a net 2,000 new jobs returning to the United States.
Fast forward to Sallie Mae's recent 3Q conference call where they provided investors with this guidance about potential job losses if FFELP were eliminated:
Bingo! Shouldn't the 2,000 jobs that they announced would be coming back to the U.S. balance out the reduction of 2,000 jobs if FFELP were eliminated?
Here is the math. Sallie Mae indicated that they had approximately 8,000 employees in their recent 2008 10-K. Let's look at two potential scenarios:
- All existing offshored operations are contracted out to non-Sallie Mae employees (no references to their offshore operations could be found in their recent 10-K)
- Therefore all 8,000 employees listed in the 10-K would be U.S. based and;
- Cutting employee count by 2,000 due to potential FFELP elimination would be balanced by 2,000 jobs that are returning to the U.S. (which don't show up in the employee count in 2008 since they are off-shored to contractors)
- Offshored operations are carried out by Sallie Mae employees
- For simplicity sake, assume that at the end of 2008, 6,000 employees were in the US and 2,000 were overseas (could make the argument that U.S. employees more efficient so it would not be a 1:1 relationship between offshore employees and number of American jobs coming back)
- In this case, Sallie Mae would continue to have 6,000 employees based in the US as the 2,000 jobs lost (if FFELP was eliminated) would be balanced by the 2,000 jobs returning from overseas.
In both scenarios above, the headcount of Sallie Mae employees (and contractors) would be reduced by 2,000 with no net change in the number of U.S.-based employees.
Now, let's look at the loan servicing centers in question and how they are described in the Sallie Mae 10-K (square footage is usually a good proxy for employee count at each location):
Location
|
Function | Square Feet | ||||
Reston, VA
|
Headquarters | 240,000 | ||||
Fishers, IN
|
Loan Servicing and Data Center | 450,000 | ||||
Newark, DE
|
Credit and Collections Center | 160,000 | ||||
Wilkes Barre, PA
|
Loan Servicing Center | 133,000 | ||||
Killeen,
TX(1)
|
Loan Servicing Center | 133,000 | ||||
Lynn Haven, FL
|
Loan Servicing Center | 133,000 | ||||
Indianapolis, IN
|
Loan Servicing Center | 100,000 |
So, with all the centers described generically as "loan servicing centers" (except for Fishers, Indiana which also houses a data center) I wondered if there was any way to minimize the local jobs impact (if FFELP were eliminated) by distributing the 2,000 jobs that are "returning to the US" among the loan servicing centers that would be most impacted by a loss of the origination function. Perhaps the company could invest in a retraining program to minimize job dislocation. Might be an interesting topic to bring up at a town hall meeting...
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