Article 43


Tuesday, June 27, 2006

Rising Of The Telecom Equipment Vendor Underclass

June 27, 2006

Nortel Networks Corp. today announced a net reduction of 1,100 jobs globally, part of a previously announced business transformation plan designed to improve its performance.

The Brampton, Ontario-based company also announced changes to its North American pension program that will reduce its pension liability deficit by $400 million by 2012.

“Today’s announcements continue our efforts to increase competitiveness, better manage our costs and secure the resources to fuel Nortel’s innovation,” Nortel CEO Mike Zafirovski said in a statement.

In all, the company announced that it will cut 1,900 jobs, while creating 800 new positions in two planned facilities known as operations centers of excellence in MEXICO and Turkey. Prior to the cuts announced today, Nortel had about 35,000 employees. The exact positions that will be trimmed have not yet been determined, and the cuts will be spread across a variety of job titles, a spokesman said.

The company said that it expects 1,200 of the 1,900 cuts to be in operations, while 350 will be in middle-management positions and another 350 will be the result of undefined “business unit efficiencies.” Nortel expects savings from the cuts to total $175 million by 2008.

Mexico and Turkey were chosen as the locations of the new centers because of their strong labor pools, cost competitiveness and proximity to major customers, Nortel said. In all, the company wants to consolidate 100 sites globally into fewer operations centers that focus on delivering engineering, product and technical support, order management, purchasing and data analysis, Nortel said.

Nortel will eliminate pension plans for current employees and move affected employees to “defined contribution” retirement plans, to which Nortel will contribute 2% of an employees’ eligible earnings for a retirement fund. In addition, Nortel will provide a 50% match on employee contributions of up to 6% of eligible earnings, for a total maximum of a 5% employer contribution.

Current retirees will not see any change to their pension income in the U.S. and Canada, although the cost-sharing formula for medical benefits will change for some U.S. retirees.


Posted by Elvis on 06/27/06 •
Section Telecom Underclass
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