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On the fragility of merger promises: A share-the-pain, share-the-prosperity plan

As Minnesotans, we are not shocked by the loss of Northwest Airlines’ headquarters. We’ve been slowly let down for the past year and were ready for Monday night’s announcement. What many of us are not sure of is how much negative change Minnesota will experience when things settle down and the other shoe drops.

Although we have been soothingly told by Delta CEO Richard Anderson and Northwest CEO Doug Steenland that they will attempt to make the merger good for Minnesota, we have to be wary of merger promises and soothing entreaties.

“I Love You, You’re Perfect. Now change” is currently running off Broadway in New York. We’re being told how important we are, how earnest the new management will be in protecting our hub, and how not much will change. Those are familiar words.

No. 1 rule: Keep the employees calm
I acquired 12 companies over the past years. In each one, my No. 1 responsibility was to keep the employees calm. You don’t want them to leave or be disgruntled with radical change. Wait until things “settle down.” Then make changes. I agree that my conduct was a bit disingenuous, but I would contend that every merger I have observed in other businesses has used the same appeal.

Still, I take Anderson and Steenland at their word; they will try hard to preserve the excellent connections and programs we’ve had from NWA. But what is the life expectancy of any big corporate CEO? Five years?

What happens when a new CEO comes in and a new hedge-fund manager puts earnings pressure on him or her? New leaders will contend that they are not bound by their predecessor’s promises.

So here is a plan: Proportional pain, proportional prosperity.

Maintaining the spirit of promises
While it’s too much to expect any company to honor inflexible commitments, it is possible to have a method to continue in the spirit of the initial merger promises.

If Mpls/St. Paul has a 10 percent reduction in international flights, so does Atlanta.

If Mpls/St. Paul has its charitable contributions reduced by x percent, so does Atlanta.

If Mpls/St Paul has a 5 or 10 percent work reduction … . You get it. So does Atlanta.

Frequent flyer programs, business clubs, baggage rules, etc. What’s good for the goose is good for the gander.

And of course if new delicious programs and perks are introduced in Atlanta, they get introduced in Minnesota.

Fortunately, we are not totally helpless in this proposed merger. We do have Rep. Jim Oberstar, chair of the House Transportation Committee, on our side.

Lee Lynch is a Minneapolis business and civic leader and chairman of the board of 

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Comments (1)

  1. Submitted by myles spicer on 04/16/2008 - 12:38 pm.

    Having been in the same business as Lynch for 45 years, and effecting many mergers as well (a common way for the ad business to grow, I certainly subscribe to his concerns, and add a few extra myself.

    First, it has been my experience that merging two troubled companies does not make a single strong one. It makes a BIGGER weak company. The structural defects and profit challenges (i.e fuel prices) still remain with the new entity. Almost every merger partner (buyer) thinks they can “do it better” than the old regime — and generally they screw it up; often in perverse ways. They mess up the assets of the deal, and add new negatives.

    In the case of NWA the new entity also has the serious destruction of employee morale to now deal with in the Delta entity. In short, the history of such mergers in recent American history is not very good; and this one has the feel of hurting a lot of groups: the employees first…the flying public second…and finally the shareholders. Hopefully I am wrong!

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