Motorola makes several benefits cost-cuts

NEW YORK (Reuters) - Embattled cell-phone maker Motorola Inc MOT.N is suspending contributions to its 401(k) worker retirement plan, freezing its pension plan, stopping some pay increases and reducing the salaries of its two top executives to cut costs in the weak economy.

A Motorola logo is seen on their building at an industrial estate in Singapore April 3, 2008. REUTERS/Vivek Prakash

Motorola said employees in many of the markets where it operates would not receive pay raises in 2009.

The company, whose money-losing cellphone division has been hemorrhaging market share about two years, said on Wednesday that the moves would create extra savings on top of the $800 million expense reduction plan it announced in October.

As Motorola's biggest rival Nokia NOK1V.HE has recently made several warnings about weak cellphone demand, analysts have worried that weaker Motorola would find it even tougher to weather the storm during an industrywide downturn.

Motorola did not say how much it expects to save from the newly announced actions, but Nomura Securities technology specialist Richard Windsor estimated that the moves would add $100 million or more to Motorola’s expense reductions.

“It’s a small step in the right direction, but it’s not going to save them either,” he said. “If you look at the degree the market has deteriorated since they last spoke to the Street, you could conclude that they will need more aggressive actions.”

Schaumburg, Illinois-based Motorola had more than 66,000 employees before 3,000 job cuts announced in October, when it reported swinging to a net loss of $397 million in its third quarter as revenue fell 15 percent to $7.48 billion.


As part of the new plan, Co-Chief Executives Greg Brown and Sanjay Jha, who was hired to head the mobile phone unit in August, will voluntarily take a 25 percent cut to their 2009 base salaries, the company said.

Brown will also voluntarily forgo any 2008 cash bonuses earned. Jha will reduce his bonus by an amount equal to Brown’s, with the rest of his bonus to be taken in restricted stock units.

“The sustained downturn in the global economy requires that we take these difficult but necessary steps,” the executives said in a joint statement, adding that they would continue to implement measures to conserve cash and cut expenses.

A Motorola representative said the company would give financial details about the latest plan during its next earnings call, which usually takes place in January.

Motorola said its U.S. pension plan freeze would be effective March 1 and would mean that participating employees who were hired by the end of 2004 would keep any benefits already accrued through the pension plan but would not accumulate any more benefits in the future.

The company said it would still invest in funding to meet its obligations for current and future retirees who have accrued benefits.

It said it would preserve vested benefits already accrued by employees and retirees but eliminate future benefit accruals for its pension plans.

Motorola said it would temporarily stop matching contributions to its 401(k) employee investment plan, but U.S. employees could still contribute under the plan.

Motorola shares were up 4 cents, or 0.9 percent, at $4.45 in late morning trading on New York Stock Exchange.

Reporting by Sinead Carew, editing by Maureen Bavdek and Gerald E. McCormick