Countrywide Faces Uphill Battle to Polish Image
Countrywide Financial , scorched by the U.S. subprime meltdown and smarting from negative publicity about its lending practices, is fighting to salvage its battered reputation.
The largest U.S. mortgage lender is "playing offense," according to a senior executive, and has hired WPP Group's Burson-Marsteller, a public relations firm with a reputation for firefighting, to design an "attack" strategy.
Employees have been sent the transcript of a cheerleading conference call as part of what spokesman Rick Simon described as a broader effort to ensure the "positive Countrywide story reaches our key audiences."
"The 'Protect Our House' campaign recognizes that no one is in a better position to understand and tell that story than our employees," Simon said in an e-mailed statement.
But the success of such a strategy will depend on whether Countrywide can prove its reputation has been unjustifiably tarred, analysts and public relations experts said.
Countrywide has been struggling as rising defaults, falling home prices and tighter credit markets make it harder to operate. It has said it could cut 12,000 jobs, or about one-fifth of its workforce, by December.
The lender is also fighting criticism that it lowered lending standards by making home loans to people who could not afford them, and thus contributed to the rise in foreclosures.
A sister campaign called "Protect Your House" will reach out to Countrywide's customers and business partners.
"If you just have a bunch of sizzle and it's not backed up by what the company is doing correctly, it will backfire and end up undercutting your credibility more," said Kent Jarrell, a senior vice president at APCO Worldwide who has managed crises for Worldcom and Merck.
"They've got to make sure they're not in denial about the criticism," he said.
Michael Sitrick, head of Los Angeles-based crisis management firm Sitrick & Co, said hiring a firm to repair a reputation can be effective, but it is more art than science.
"In such an environment, you have to be very careful of preserving your credibility when you're talking to employees, customers or Wall Street," he said.
In a Sept. 26 call with about 250 of Countrywide's "best and brightest" employees, its executive managing director of residential lending, Andrew Gissinger, said preparing the company for "unwarranted attacks" and protecting its reputation were key challenges.
A copy of the call transcript was then circulated more widely, and it was later published on the Wall Street Journal Web site, where the news was first reported Wednesday.
"We're now back on the offense," said Gissinger, a former National Football League offensive tackle.
Plan of Attack
Gissinger urged employees to spread the message that Countrywide is "the best run, most profitable mortgage company in America." Employees who sign a loyalty pledge will receive a green wristband with the words "Protect Our House" on it.
But Sitrick said "employees are most concerned about what steps are being taken to address issues in the marketplace."
One analyst felt addressing employee concerns was critical for Countrywide at the moment.
"With the job cuts, I can only imagine how morale must be," Morningstar analyst Erin Swanson said. "Managing their troops is definitely a priority because they have a business to run."
Jason Schechter, a Burson-Marsteller representative who spoke on the call, assured employees that his firm had helped companies weather the "worst type of publicity."
Schechter said six Burson people would operate out of Countrywide's Calabasas, California, headquarters to implement the plan. Overall, 25 people will be working with Countrywide.
Countrywide's Simon said Burson, which worked for Johnson & Johnson while it grappled with Tylenol poisonings, has handled publicity for the mortgage lender for a couple years.