GE forces out Carpenter as Kidder's chairman

June 23, 1994|By Los Angeles Times

NEW YORK -- Moving decisively to stem a collapse in the reputation and morale of Kidder, Peabody & Co., General Electric Co. ousted the troubled Wall Street brokerage's chief executive officer and installed two top-level GE executives at the unit's helm yesterday.

Out as Kidder's chairman and CEO is Michael A. Carpenter, a close associate whom GE Chairman John F. Welch installed at Kidder shortly after its acquisition by GE in 1986.

GE, which bought Kidder for more than $600 million and has since pumped another $700 million in capital into the firm, made the change as the brokerage continues to reel from a scandal over phantom trades on its government securities desk and from questions about the health of its multi-billion-dollar portfolio of tricky mortgage-backed securities.

Those problems -- and the attendant bad publicity -- have provoked some Kidder customers to transfer their accounts to rival firms. Competitors also exploited Kidder's weaknesses by trading against it and spreading damaging rumors, Mr. Welch said in a meeting with reporters.

"It was clear that every day the continuing barrage of stories was going to have an effect," he said. "It was clear that unless something was done, it was going to cost us some money. There was an impression that there were more storms coming, there was a run on it, and it was going to get worse and worse."

But Mr. Welch again denied persistent Wall Street speculation that the giant industrial and financial-services company would like to unload Kidder. The management change, he insisted, was intended "to lay to rest any perceived issues about Kidder's financial strength or our corporate support for the firm."

The company said the British-born Mr. Carpenter, formerly an executive at the highly regarded GE Capital Corp., had resigned.

His duties will be assumed on an interim basis by Dennis D. Dammermann, 48, GE's senior vice president and chief financial officer. GE also appointed Denis J. Nayden, 40, as Kidder's president and chief operating officer.

Mr. Nayden, who gives up his post as executive vice president of GE Capital, is to move into Kidder's top spot in three to five months, when Mr. Dammermann will return to the parent company in his old capacity. Mr. Dammermann will retain his existing titles at GE.

Mr. Welch was blunt in addressing Kidder employees yesterday over the firm's internal public-address system: "We're going to draw a line in the sand . . . and go forward."

GE said Kidder expects to be "modestly profitable" in June but will lose $25 million to $30 million, after taxes, in the current quarter.

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