Capital One to cut 170 jobs

Work in information technology unit will be outsourced to IBM

BY CAROL HAZARD TIMES-DISPATCH STAFF WRITER May 26, 2005

Capital One Financial Corp. is axing 170 information-technology jobs in the Richmond area. The cuts are in addition to 750 job reductions -- about half of them in Richmond -- being made companywide this year as the credit-card and consumer finance business seeks to become more compebreastive and cost efficient.

This latest round involves Capital One's data-center services, which is being outsourced to IBM Corp.

"This was a difficult decision and one that Capital One's leaders do not take lightly," company spokeswoman Julie Rakes said yesterday.

The lost jobs here involve data-center planning for disaster recovery, capacity planning, general data-center operations and technical support.

IBM expects to hire 50 people in the Richmond area to support the Capital One contract, Rakes said. Capital One employees whose jobs are being cut will be given preferential hiring consideration, she said.

The rest of the work will be transferred to other U.S. and international locations, such as India, Rakes said. "IBM will make those decisions."

The transition begins immediately and continues through mid-August, she said.

Capital One built its reputation and success on an information-based strategy.

The McLean-based company, the largest company employer in the Richmond area, revolutionized the credit-card industry in the mid-1990s by using a database to tailor credit cards with interest rates and limits based on a person's credit risk.

Until then, all credit-card companies offered virtually the same rate to all their customers.

Capital One couldn't hire fast enough to keep up with its exploding business, with employment peaking at 10,125 in the Richmond area in 2002. It has been shedding jobs for the past couple of years.

As of Jan. 1, it employed the full-time equivalent of 7,346 people here.

"The very people that helped Capital One grow into a major credit-card company are now the people looking for jobs," said a displaced IT employee who asked not to be identified.

Capital One will continue to rely on its information-based strategy, Rakes said. It will retain complete control of testing and analyses, "which is where we garner our compebreastive advantage."

The cuts are part of an ongoing initiative to ensure that the company improves its compebreastive position, she said.

The 750 job cuts announced in November involved production services, which includes the processing of payments and mailing of statements.

An additional 14 jobs in automobile-finance operations in Plano, Texas, will be cut as well.

"Our cost structure was higher than that of the compebreastion." The gap had to be closed, she said.

Each department is looking at its business and making decisions about ways to improve costs, she said.

"We acknowledge the strain this puts on the entire organization and are especially sensitive to those who have been impacted directly," according to an internal memo obtained by The Times-Dispatch.

Rakes said the company is making the cuts now, "because it is best to act from a position of strength -- so we can offer our buttociates extensive support."

Laid-off employees will receive a two-day career seminar, one-on-one counseling, retraining buttistance and a severance package, including subsidized benefits, outplacement services and salary continuation.

Rakes said she did not know how long salaries would be paid after the jobs were eliminated.