Nortel To Slash 1,100 Jobs

Nortel said changes to its global operations organization will result in the loss of roughly 1,900 positions. The Brampton, Ontario-based company also plans to add some 800 new positions over the next two years. The changes are part of a previously announced restructuring plan.

"Today's announcements continue our efforts to increase competitiveness, better manage our costs and secure the resources to fuel Nortel's innovation," Nortel President and CEO Mike Zafirovksi said in a statement.

The new jobs come as Nortel creates two new Operations Centers of Excellence in Mexico and Turkey, where the company said there's a strong labor pool, cost competitiveness and proximity to major customers. Over the long term, Nortel plans to consolidate more than 100 sites worldwide into fewer operations centers, which provide services such as engineering, product and technical support, order management, purchasing and data analysis.

Nortel said the consolidation will eliminate 1,200 jobs. The other 700 jobs to be terminated will come by cutting 350 middle-management positions and 350 additional jobs through business-unit efficiencies, the company said.

The organizational changes are expected to cost $100 million over the next two years and yield a savings of $100 million in 2007 and $175 million by 2008, according to Nortel.

In addition, Nortel plans to change its Capital Accumulation and Retirement Program in the United States and Canada from a defined benefit pension plan to a defined contribution retirement program, beginning Jan. 1, 2008. The company is also eliminating post-retirement health-care benefits for employees with five years of service, who are not age 50, on July 1, 2006. Current retirees won't see any change to their pension income.

Nortel expects the changes to slash $100 million in pension expenses annually starting in 2008, producing a savings of more than $400 million by 2012.