Monday, June 26, 2006

Nortel Announces Job and Pension Cuts

Nortel announced significant changes to its North American pension programs as well as a net reduction of approximately 1,100 positions globally. Nortel also announced a series of new initiatives to create a world-class Operations organization.

The announcement is the latest in a series of actions Nortel is taking to achieve a targeted operating-margin expansion in excess of US$1.5 billion in 2008.

Changes to the pension program are expected to result in an estimated annual reduction of US$100 million in pension expense starting in 2008 and savings of more than US$400 million in cash by the year 2012. Specifically, Nortel employees currently in defined benefit pension plans will be moved to defined contribution retirement programs.
The defined contribution programs will have a new formula which is comprised of an automatic employer contribution equal to two percent of employees' eligible earnings. In addition, Nortel will provide a 50 percent match on employee contributions of up to six percent of eligible earnings, for a total maximum five percent employer contribution.

Current post-retirement healthcare benefits will be eliminated for employees who are not age 50 with five years of service on July 1, 2006. All future retirees who do not meet this age and service criteria will continue to have access to healthcare coverage at their own cost through Nortel's preferred provider, given they meet eligibility requirements when they retire.

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