SCHAUMBURG, Ill. — Members of Motorola Employees Credit Union are bracing for pension and 401(k) plan cuts from Motorola Inc. as the mobile communications giant becomes the latest employer to slash benefits to manage through the recession.
The $36.6 billion Motorola announced in late December that it would permanently freeze its U.S. pension plans effective March 1. The company said it will preserve vested benefits accrued by employees and retirees but plans to eliminate future benefit accruals. In another cost-cutting move, as of Jan. 1, Motorola temporarily suspended all company matching contributions to its 401(k) plan.
Employees in many of Motorola's markets will not receive a salary increase in 2009, the company said. Co-CEOs Greg Brown and Sanjay Jha said they will voluntarily take a 25% pay cut this year. While Brown turned down his 2008 cash bonus, Jha's employment contract provided for a guaranteed cash bonus. However, Jha's bonus will be voluntarily reduced by an amount equal to Brown's forfeited bonus and the remainder will be taken in the form of restricted stock units, 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 sustained downturn in the global economy. Motorola has approximately 66,000 employees in 24 countries.
Meanwhile, the $681 million Motorola Employees CU or as it is commonly called, MECU, has not heard concerns from its membership yet, said John Fiore, president/CEO. Founded in 1939, the credit union serves nearly 40,000 members who are employees and retirees of Motorola Inc. and its subsidiaries. Half of the members are active Motorola employees, which at one point made up 80% of MECU's membership, he noted. Those numbers have fallen to 50%, and the remaining half are retirees, people who have left the company or were laid off.
“Certainly, I think everyone understands the condition of the economy 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 have a defined benefits plan” and applauded the company for keeping it going as long as it could. Still, “it's a pretty expensive endeavor,” he pointed out.
Motorola's temporary suspension of matching contributions to its 401(k) plans is clearly a sign of the times, Fiore said, adding that other large companies such as FedEx are doing the same thing to manage costs.
“It doesn't mean that [Motorola] won't reconvene at some later date once the company is in a better financial position,” Fiore said.
For its part, MECU is reassuring members that the financial institution is on solid ground.
–msamaad@cutimes.com

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Motorola Hangs Up on Pension and Matching 401(k) Contributions

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