NEW YORK, N.Y. (SatireWire.com) - Nortel Networks will reduce its workforce by an unprecedented 120 percent by the end of 2001, believed to be the first time a major corporation has laid off more employees than it actually has.
Nortel stock soared more than 12 points on the news. The reduction decision, announced Wednesday, came after a year-long internal review of cost-cutting procedures, said Nortel Networks Chairman and CEO John Roth. The initial report concluded the company would save 1.2 billion by eliminating 20 percent of its 88,000 employees.
>>From there, said Roth, "it didn't take a genius to figure out that if we cut 40 percent of our workforce, we'd save $2.4 billion, and if we cut 100 percent of our workforce, we'd save $6 billion. But then we thought, why stop there? Let's cut another 20 percent and save $7 billion. "We believe in increasing shareholder value, and we believe that by decreasing expenditures, we enhance our competitive cost position and our bottom line," he added.
Nortel Networks plans to achieve the 100 percent internal reduction
through
layoffs, attrition and early retirement packages. To achieve the 20
percent in external reductions, the company plans to involuntarily downsize
18,000 non-Nortel employees who presently work for other companies. "We
pretty much picked them out of a hat," said Roth. Among firms Nortel has
picked as "External Reduction Targets," or ERTs, are Quaker Oats, AMR Corporation,
parent of American Airlines, Lockheed, Boeing, and Charles Schwab &
Co.
Nortel's plan presents a "win-win" for the company and ERTs, said Roth, as any savings by ERTs would be passed on to Nortel, while the ERTs themselves would benefit by the increase in stock rice that usually accompanies personnel cutback announcements. "We're also hoping that since, over the years, we've been really helpful to a lot of companies, they'll do this for us kind of as a favour," said Roth. Legally, pink slips sent out by Nortel would have no standing at ERTs unless those companies agreed.
While executives at ERTs declined to comment, employees at those companies
said they were not inclined to cooperate. "This is ridiculous. I don't
work for Nortel. They can't fire me," said Kaili Blackburn, a flight attendant
with American Airlines. Reactions like that, replied Roth, "are not
very sporting."
Inspiration for Nortel's plan came from previous cutback initiatives,
said company officials. In January of 2001, for instance, the company announced
it would trim 10,000 jobs over the next year. However, just two months
later, Nortel said it had already reached its quota. "We were quite
surprised at the number of employees willing to leave Nortel in such
a hurry, and we decided to build on that," Roth said.
Analysts credited Roth's short-term vision, noting that the announcement had the desired effect of immediately increasing Nortel's share value. However, the long-term ramifications could be detrimental, said Bear Stearns analyst Beldon McInty. "It's a little early to tell, but by eliminating all its employees, Nortel may jeopardize its market position and could, at least theoretically, cease to exist," said McInty.
Roth, however, urged patience: "To my knowledge, this hasn't been done
before, so let's just wait and see what happens."
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See this for more details
Although this is eerie:
