SCHAUMBURG, Ill. — Members of Motorola Employees Credit Unionare bracing for pension and 401(k) plan cuts from Motorola Inc. asthe mobile communications giant becomes the latest employer toslash benefits to manage through the recession.
The $36.6 billion Motorola announced in late December that it wouldpermanently freeze its U.S. pension plans effective March 1. Thecompany said it will preserve vested benefits accrued by employeesand retirees but plans to eliminate future benefit accruals. Inanother cost-cutting move, as of Jan. 1, Motorola temporarilysuspended all company matching contributions to its 401(k)plan.
Employees in many of Motorola's markets will not receive a salaryincrease in 2009, the company said. Co-CEOs Greg Brown and SanjayJha said they will voluntarily take a 25% pay cut this year. WhileBrown turned down his 2008 cash bonus, Jha's employment contractprovided for a guaranteed cash bonus. However, Jha's bonus will bevoluntarily reduced by an amount equal to Brown's forfeited bonusand the remainder will be taken in the form of restricted stockunits, according to Motorola.
All of the benefit and plan slashes are expected to save Motorola$800 million, the company said. Brown and Jha said the cuts are“difficult but necessary steps” as a result of the sustaineddownturn in the global economy. Motorola has approximately 66,000employees in 24 countries.
Meanwhile, the $681 million Motorola Employees CU or as it iscommonly called, MECU, has not heard concerns from its membershipyet, said John Fiore, president/CEO. Founded in 1939, the creditunion serves nearly 40,000 members who are employees and retireesof Motorola Inc. and its subsidiaries. Half of the members areactive Motorola employees, which at one point made up 80% of MECU'smembership, he noted. Those numbers have fallen to 50%, and theremaining half are retirees, people who have left the company orwere laid off.
“Certainly, I think everyone understands the condition of theeconomy and the condition of the company right now,” Fiore said.“Most of this is not a surprise to [the members].”
Fiore said Motorola is “probably one of the last companies to havea defined benefits plan” and applauded the company for keeping itgoing as long as it could. Still, “it's a pretty expensiveendeavor,” he pointed out.
Motorola's temporary suspension of matching contributions to its401(k) plans is clearly a sign of the times, Fiore said, addingthat other large companies such as FedEx are doing the same thingto manage costs.
“It doesn't mean that [Motorola] won't reconvene at some later dateonce the company is in a better financial position,” Fioresaid.
For its part, MECU is reassuring members that the financialinstitution is on solid ground.
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