Motorola CU-West, one of last single-sponsor holdouts, expanding FOM beyond sponsor

SCOTTSDALE, Ariz.-Motorola Employees Credit Union-West, long a leader among single sponsor CUs, is planning to end its formal ties with its parent, change its name and plans to pursue an expanded field of membership in 58 Phoenix area zip codes starting next year. The move to separate from the Schaumburg, Ill.-based high tech parent after a 50-year linkup comes amidst some pain, confusion and “emotion,” acknowledged Daniel F. Desmond, the CU’s president and CEO. “It’s kind of like going through a divorce, though this one is amicable and is something that is right for us, the credit union,” said Desmond. The $570 million Arizona credit union with 56,000 members and 17 branches in metropolitan Phoenix and Austin, Texas, said it was forced to make the separation move by the parent which demanded the CU stop using “Motorola” in its name if it wanted to serve employees in new firms spun off by Motorola as the suburban Chicago firm laid off thousands of employees over the last three years. The formal separation, approved by the CU’s board last spring and by state regulators in May, must still win approval of the CU membership in a bylaw change due for ratification at a Sept. 9 meeting. Letters explaining the “membership expansion notification” went out July 24. The letter signed by Desmond and William M. Fulton, the CU chairman, cited the “economic difficulties” borne by the parent in recent years resulting in the layoffs and the “divestiture, sale and closure of a number of the businesses that we serve in both the Phoenix and Austin marketplaces.” The Motorola “headcount” noted the CU letter “has decreased by over 60% from their highs in Arizona and by over 40% from their highs in Texas.” The staff cutbacks in the Phoenix area have been particularly severe with the Chicago firm having as many as 22,000 employees in 1997-98 dropping to about 10,000 currently. The firm was listed as the fifth largest employer in Phoenix in 2001 and also the fifth largest in revenue behind such firms as General Electric and Boeing Co. Motorola Employees CU said that it already has members in the companies spun off by Motorola including ON Semiconductor and General Dynamics divisions but the parent firm demanded the CU effective Jan. 1 stop offering membership to new employees. The parent, said the letter, “acknowledged the need to expand our field of membership beyond Motorola employees, but has remained firm in its conviction that if the credit union wants to use `Motorola’ in its name, it can only serve Motorola employees.” In light of the employee cutbacks, “new membership growth has stalled, loan growth has turned negative and member loan delinquency and charge-offs have increased markedly,” said the letter. Financial data on those points was not immediately available at press time. Nonetheless, “MECU-West continues to remain strong,” continued the letter adding, however, “the time for additional proactive change is upon us.” On the “positive side,” said the letter “Motorola has expressed its desire to have our credit union continue to serve its facilities in Phoenix and Austin.” This “opportunity” means that the CU can keep Motorola employees “as the `core’ of the credit union’s membership and keep ON Semiconductor and General Dynamics employees in the field of membership.” At the same time, Motorola CU can add new SEGs “as well as pursue individuals who live or work in the neighborhoods surrounding our existing branches,” the letter noted. Its 12 Phoenix branches are located on the city’s east side or eastern suburbs, which comprise the 58 new codes sought under the FOM expansion. The remaining five branches are in Austin and of its total 56,000 members, three fourths are in Phoenix with the remainder in Austin. The CU said in June it hired Weber Marketing Co., a Seattle firm with experience in CU branding and logo development, to come up with a new name and a promotion strategy. Desmond said the separation plan has been in the works “since last fall when we saw the handwriting on the wall” regarding the Chicago firm’s desire for the CU to halt using the Motorola name for membership solicitation in the spunoff firms. Under the separation package, the CU, said Desmond, has had to find new benefits and insurance providers for its 210 employees required by the parent to “become employees of the newly named credit union.” The CU maintains its main facility on the Motorola campus with the CU “writing a check” to the parent for “salaries, fringes, supplies etc.,” said Desmond. The CU executive said before pursuing the separation, he sought out the advice of other single sponsor CUs across the country noting that one CEO, Oland Jones of Eastman Credit Union, Kingsport, Tenn. met with the MECU staff in Phoenix earlier in the year. The Tennessee CU had formerly been linked to its sponsor, Eastman Chemical Co. Desmond emphasized that its spinoff from the parent is “not a conversion” to a community charter since the state’s CU law does not recognize such entities but it does allow expanded FOM by zip code. Regardless, “we exist for our member-owners and not for Motorola,” he concluded. -