Financially stressed Motorola Inc. disclosed plans to cut costs by cutting the pay of its co-CEOs and freezing its U.S. pension plans and ending its practice of matching employees' 401(k) contributions.
The company didn't spell out how much money it expects to save from what it characterized as "difficult but necessary steps."
Such plans, which once were the dominant retirement package for major American corporations, have been shut down at many companies in favor of less-costly plans in which corporate workers receive annual contributions into a personal retirement fund, but don't receive lifetime benefits.
Motorola emphasized that employees who have vested pension plans will receive them upon retirement; the company is simply no longer accruing future contributions to those plans.
Motorola also said that as of Jan. 1, it will stop making matching contributions to its workers' 401(k) plans. Until now, workers have made tax-protected contributions into their retirement plan and the company has provided a matching contribution, effectively doubling the workers' annual retirement set-aside.
Now, however, the company is ending that match in order to save cash.
"The sustained downturn in the global economy requires that we take these difficult but necessary steps," the company said.
Both of the companies co-chief executive officers -- Greg Brown and Sanjay Jha -- have agreed to take a 25 percent cut in their base salary in 2009. Brown will also forgo any cash bonus for the 2008 year.
Jha's contract guarantees a cash bonus in 2008, the company noted. His bonus will also be reduced by an amount equal to the bonus that Brown has agreed to forfeit, and the remainder will be taken in the form of restricted stock units.
Motorola freezes pension plans, cuts co-CEOs' pay
We've upgraded our reader commenting system. Learn more about the new features.