Pay cuts at Motorola
December 17 2008 - 1:15 pm ET | Phil Carson | RCR Wireless News
Motorola Inc. said today it would freeze pension plans and some salaries and suspend company contributions to employees’ 401(k) plans. The company’s co-CEOs said they would take a 25% cut in base salary.
The company gave no dollar figure for the magnitude of the resulting savings, but said the steps were in addition to $800 million in annual savings announced in October.
Motorola, of course, faces the twin, daunting challenges of a deteriorating global economy as well as turning around its mobile devices business, which had been its most profitable business. Those twin challenges are mounting, according to one analyst.
“We expect Motorola to face a particularly difficult fourth quarter and (full year) 2009 because of handset product-range problems and high reliance on the United States and Chinese phone demand,” wrote analyst Tero Kuittinen at Global Crown Capital L.L.C., in a note to investors yesterday. “We think the U.S. and Chinese markets have softened considerably over the past four weeks, while competitive pressures in America have jumped to a new level. We still expect Motorola’s handset unit to drift into a crisis and be forced to scale back its global ambitions.”
The beneficiary, according to Kuittinen: Motorola’s once-arch rival, Nokia Corp.
Motorola’s announcement today said the company would meet its pension obligations to present and future retirees, but would permanently freeze its U.S. pension plans and eliminate future benefit accruals. Employees may still contribute to their 401(k) plan, but the company will not provide matching funds. Employees in “many markets” will see their salaries frozen next year.
Co-CEOs Greg Brown and Sanjay Jha, in a prepared statement, referred only to “the sustained downturn in the global economy” for the “difficult but necessary steps” announced today.
Meanwhile, the company’s infrastructure business announced a CDMA network deal with China Telecom that one analyst said was worth more than $100 million.
December 17, 2008 01:17 pm
What they need to do is stop blaming the deteriorating economy and face reality. I think we can all agree on the poor design and lack of innovative features on their phones. Motorola is becoming just like the "Big 3" that has been struggling for the past 5-10 years. I think the entire company needs to change their business model in order to stay competitive and gain back the many customers they have lost.
December 17, 2008 01:17 pm
What about the co-CEO's working for $1 each as is becoming the new standard for the CEO's of troubled companies???? If these guys are worth all that they get paid, why couldn't their amazing decisions prepare the company for what has happened? Was it a touch of Motorola arrogance - design it and they will buy? Whatever the savings, and wherever they come from, they only go toward making Wall Street and the analysts happy. There is no more concern for the employees. What happened to the vision of Motorola being one of the world's premiere employers?
December 17, 2008 01:17 pm
A 25% cut in base salary, eh? Wow, that's going to help how? These guys need to get their heads out of the clouds and face reality!!!