Motorola Freezes Pensions, Chops CEO Salaries
According to Motorola, it will permanently freeze its U.S. pension plans effective March 1, 2009, "to better align with industry norms." The freeze, Motorola said, will eliminate future benefit accruals for U.S. employees and retirees while preserving vested benefits accrued.
Starting Jan. 1, 2009, Motorola will also temporarily suspend all company matching contributions to employees' 401(k) plans.
Along with freezing pensions and suspending 401(k) matches, Motorola said it will freeze salary increases in 2009 for "employees in many of the markets in which it operates."
To further cut dollars from the budget, Motorola co-CEOs Greg Brown and Sanjay Jha will take a 25 percent compensation decrease in their base salaries in 2009. Brown will also forgo any 2008 cash bonuses. And while Jha's contract guarantees a cash bonus for 2008, his bonus will be voluntarily reduced by an amount equal to Brown's forfeited bonus and the remainder will be taken back in the form of restricted stock units.
"The sustained downturn in the global economy requires that we take these difficult but necessary steps," Brown and Jha said in a statement. "While serving our customers remains a top priority, we are equally focused on our cost structure, and we will continue to implement appropriate measures to conserve cash and reduce expenses."
According to Motorola, the new round of cuts is in addition to the $800 million cost reduction plan the Schaumburg, Ill.-based company announced in October. At the time, Motorola said it would lay off about 3,000 employees, roughly 5 percent of its work force, mainly in its oft-struggling mobile devices unit. The layoffs, combined with other cost-cutting initiatives, including eliminating certain lines of mobile phones, will help achieve that $800 million reduction, Motorola has said.
Motorola's cost-cutting also has delayed the company's plans to spin into two separate businesses, making the mobile devices unit its own company. Plans for the business separation have been pushed beyond 2009.