Motorola To Freeze Pensions, Many Salaries In 2009

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Motorola on Wednesday said it will permanently freeze U.S. pension plans -- eliminating future benefit accruals -- and that employees in many markets will not receive a pay raise in 2009.

The Schaumburg, Ill.-based company cited the need to cut costs “amid continuing global economic challenges,” and said its co-CEOs, Greg Brown and Sanjay Jha, will voluntarily take a 25% decrease in base salary in 2009.

The moves come after Motorola said in October that it would lay off 3,000 workers, or about 5% of its work force, mostly in its mobile devices unit. The company said the layoffs, combined with other cost-cutting measures, would save $800 million in 2009.

"The sustained downturn in the global economy requires that we take these difficult but necessary steps," Brown and Jha said, in a joint statement. "While serving our customers remains a top priority, we are equally focused on our cost structure, and we will continue to implement appropriate measures to conserve cash and reduce expenses."

Brown oversees Motorola's Broadband Mobility Solutions business, which comprises the cable-focused Home & Networks Mobility and the Enterprise Mobility Solutions businesses. Jha, hired in August, heads the mobile devices business.

Motorola had intended to spin off its declining mobile-phone business in the third quarter of 2009, but has since called off those plans.

As part of the measures announced Wednesday, effective March 1, 2009, Motorola will permanently freeze its U.S. pension plans, preserving vested benefits accrued by employees and retirees but eliminating future benefit accruals. Motorola said it intends to continue to provide funding to meet its pension obligations to present and future retirees.

Effective January 1, 2009, Motorola also will temporarily suspend all company matching contributions to its 401(k) plan.