After managing to avoid job cuts last year even as the mutual fund industry suffered big market losses and investor withdrawals, T. Rowe Price Group says it now has no choice and is dismissing 288 people, two-thirds of them in its Baltimore and Owings Mills offices. Moreover, Price is delaying plans to add 1,400 jobs at two new buildings under construction at its Owings Mills campus, an expansion that would have made it Baltimore County's largest private employer.
David S. Iannucci, the county's economic development director, said Price has informed the county that there likely will be a multiyear delay in recruiting and hiring the projected employees.
Iannucci said he is sure that Price will fulfill its expansion plans eventually.
"Given the hundreds of terrible headlines that have been coming out of Wall Street about job losses in the financial services sector, it doesn't come as a surprise that stalwarts like T. Rowe Price would ultimately have to deal with the same job issues," he said.
Price is the third-largest private employer in Baltimore County, with about 2,600 workers there. When the expansion plans were announced two years ago, Price expected occupancy at the office buildings and two parking garages to begin in the second half of this year. Construction is still expected to be completed by the end of the year.
"We're still hopeful for long-term growth over time. It's likely at this point that it'll take several years to achieve that hiring level we announced two years ago," said spokesman Brian Lewbart.
The job cuts were disclosed as Price reported that its first-quarter profit fell 68 percent to $48.2 million, or 19 cents per diluted share. That is compared with net income of $151.5 million, or 55 cents per diluted share, in the year-ago period.
The layoffs, effective immediately, affected 201 workers in the firm's telephone, processing and technology groups in Baltimore and Owings Mills, where lower work volumes and fewer projects resulted in over-staffing, the company said.
Others worked in similar departments in Colorado Springs, Colo.; Tampa, Fla.; and London. No portfolio managers were affected, but six of the firm's 340 investment professionals were laid off.
Price's last significant work force cutbacks were in late 2001, when the company trimmed more than 200 workers after the post-Sept. 11 market decline.
The dismissed workers were notified Tuesday, and the company said it is offering severance and outplacement services.
"We feel bad about losing people," Chief Executive Officer James A.C. Kennedy said in an interview. "[Tuesday] was a hard day. It's not easy to pull the trigger, and it's tough delivering the message.
"For a lot of people who have left, who were very dedicated to their clients, we were sad to see them leave. We have a responsibility to our clients, fellow employees and shareholders to manage the company over time. It was a decision we had to make."
Competitors in the mutual fund industry, including Baltimore's Legg Mason Inc., Fidelity Investments and Alliance Bernstein, have reduced their work forces in response to dire market conditions that prompted investors to pull record amounts of money out of funds last year.
But Price held out for as long as it could, surprising some analysts, said Greggory Warren, an analyst at Morningstar.
"As the first quarter progressed, there wasn't going to be an immediate recovery in the markets that it probably made more sense to cut back in areas where volumes have fallen off," Warren said. "People were more surprised coming into the year that they were talking about not cutting anybody at all."
Kennedy said Price began curbing expenses late in 2007 and became more aggressive about costs last year.
As market conditions worsened, Price's assets under management and revenue dipped to 2005 levels, Kennedy said. At the same time, the volume of service calls from clients fell 20 percent to 30 percent in recent months.
And moves to cut expenses were not enough to offset the declining markets, forcing job cuts, the company said. Price said the work force reduction is expected to save $17 million over four quarters, and $6 million in annualized expenses will be saved for the firm's mutual funds.
With attrition and retirement, along with the job cuts, the company's work force is down nearly 9 percent since the beginning of the year.
T. Rowe Price had about 5,230 employees worldwide as of March 31, including 3,800 in the Baltimore region.
D.J. Neiman, an analyst at William Blair & Co., said the market reacted favorably to Price's job cuts because investors had been concerned that the company was "behind the curve" on cutting expenses relative to its competitors.
Shares rose 28 cents Wednesday to close at $36.52.
While layoffs are tough on employees and the company, Neiman said, Price's operating costs are now "more in line with realities of the decline and asset values."
Assets under management fell to $268.8 billion in the first quarter, down from a peak of $400 billion at the start of 2008.
One bright spot was new client investments of $4.5 billion in the second quarter. That included $1.8 million into its mutual funds, particularly its retirement funds that adjust as clients age.