SCHAUMBURG, Ill. (AP) -- Motorola Inc., which has been struggling to revive its business in recent years, is freezing its pension plans and reducing executive pay in another set of cost-cutting measures.
The company, which blamed the recession for the moves disclosed Wednesday, will permanently freeze its U.S. pension plans, temporarily suspend matching 401(k) contributions and reduce the base salary of its two co-chief executives. Motorola had already announced an $800 million cost-saving plan in October, but spokeswoman Jennifer Erickson would not elaborate on how much additional money the company expects to save with the latest steps.
Motorola plans to freeze the salaries of an unspecified number of other employees in many of its markets in 2009. Erickson said the company will raise salaries in countries where it is "legally required or a competitive necessity; however, in most cases, these increases will be below 2008 levels." She did not specify the countries or how many employees would be affected by the pay freeze.
Employees who have already retired will continue to receive a pension. And Motorola is keeping the benefits for employees whose pensions have already vested. But workers will not see any additional benefit accruals after March 1.
Motorola had already eliminated its pension plan for employees hired after Jan. 1, 2005.
The company earlier this fall said it will cut 3,000 jobs by April, with about 2,000 coming from its struggling cell phone unit, as part of the $800 million cost-reduction plan.
Now Motorola says Co-CEOs Greg Brown and Sanjay Jha will take a 25 percent cut in their base salary of $1.2 million in 2009. Brown will also forgo any 2008 cash bonus earned under the company's incentive plan. For Jha, whose employment contract provides for a guaranteed cash bonus for 2008, the bonus will be voluntarily reduced and the rest taken as restricted stock units.
Motorola said it is taking these measures to address the global economic turmoil. But the company has been under pressure to follow the runaway success of its Razr cell phone, which came out in 2005. Earlier this year, the company announced plans to separate its struggling handset business from other operations, forming two separate, publicly traded companies. But in October Motorola said it will postpone the spinoff, citing the economic downturn and the financial market turmoil.
But he praised the company's efforts to reduce expenses and stay profitable despite the troubles in its mobile device unit, saying it's done an "admirable job."
Motorola shares were unchanged to close at $4.41 Wednesday. The stock has lost nearly three-quarters of its value since the beginning of the year.