However big the expected layoff turns out to be at Sprint, there is no question that Johnson County and metropolitan Kansas City will be far better off with the company going it alone than merging with T-Mobile. Had the merger occurred, it is likely our headquarters would not have remained here.
That doesn’t mean there won’t be plenty of pain.
Sprint’s new CEO, Marcelo Claure, will have to cut deeply in order to please his boss, Softbank’s Masayoshi Son. Even though Son is one of the wealthiest men in the world, he has made it clear he will not tolerate a continuation of massive losses at Sprint, into the billions.
Given the fact that Sprint is now positioning itself as the low-cost carrier — up against T-Mobile who also wants to be the low-cost carrier — expenses will have to be slashed mightily.
Troubled public companies under new ownership often make dramatic reductions in payroll, perhaps as much as 20 percent. I would guess that this is what is in store for Sprint. This will be a dramatic shock to a company with a reputation for being bureaucratic and a slow-mover.
If the cuts reach headquarters in the same proportion that could mean as many as 1,400 of the 7,200 local employees would feel the ax. Sprint employs 36,000 people overall.
The impact to Johnson County’s economy, as well as the metro’s, will be considerable. Sprint is the second largest private employer in metropolitan Kansas City.
For every person eliminated at Sprint, two non-employees whose livelihoods depend on Sprint would also lose their jobs. That is according to the County Economic Research Council in Johnson County.
That means a loss of 1,400 Sprint employees would really translate into 4,200 area individuals.
At an average compensation of $50,000 a year, the local economy could be sapped of $210 million a year. The average compensation for highly paid Sprint employees is probably considerably greater than that.
Doug Davidson, president of CERI, explains that there is a multiplier effect, fairly unique to Sprint in this metropolitan area. Because so many of the dollars that come to Sprint come from the outside — unlike a retailer, for example, that recycles local dollars — Sprint’s dollars are all new dollars. Losing those “export” dollars would be felt deeply.
“Major layoffs at Sprint would take some of the edge out of our growth,” Davidson said. “It wouldn’t all be felt immediately, but as these laid-off individuals cut back on their spending, it would impact the economy.
“A 20 percent layoff is nothing to sneeze at,” said Davidson, even though Johnson County’s labor force is about 300,000.
“It would also modestly affect the demand for housing,” Davidson said.
The impact of Sprint layoffs is but one issue.
Civic leaders throughout the metropolitan area are living in mortal fear that, with a severe tightening of the budget, Sprint may back away from being the aggressive corporate citizen it has been.
Sprint spends millions of dollars each year in Greater Kansas City, sponsoring and supporting too many organizations to count. Sprint’s name is everywhere — including, of course, the downtown arena.
Would Son and Claure want Sprint to continue being the kind of corporate citizen it has been in the past, when they may be laying off thousands of employees and tightening all other expenses?
It is doubtful, but we can hope.
Most important, will Sprint be around in five or 10 years, thriving as the low-cost carrier with a great network?
Many experts think the answer is yes.
Son is not used to losing. He built a back-of-the-pack carrier in Japan into one of the leaders. And he has hired for Sprint a highly successful entrepreneur, agile and smart, to take him where Son wants to go.
Perhaps the outlook for Sprint is better than it has been in many years.
It is unfortunate that massive layoffs likely will have to be part of the grand plan.
To reach Steve Rose, a longtime Johnson County columnist, send email to email@example.com.