PacTel Sweetens Retirement Offer
Pacific Telesis said Tuesday that it hopes to accelerate its previously announced job reduction plans by cutting about 3,000 management positions, or 17% of its salaried work force, through a new early retirement offer in November.
Starting next April, the company will also eliminate a policy of virtual job security for remaining managers, possibly resulting in layoffs.
San Francisco-based Pacific Telesis has already cut 3,100 management and non-management jobs since it announced a year and a half ago that it planned to cut 11,000 jobs from the 62,000 of its subsidiary Pacific Bell and the parent company staff of Pacific Telesis. But at Pacific Bell, management ranks have been cut by 2% since late 1989, compared to 7% for non-management jobs.
In January, 1990, Pacific Telesis said Pacific Bell would cut 3,400 salaried jobs by 1995, but only 350 have been eliminated through attrition and early retirement so far, almost a third of the way through the period.
In order to meet competitive pressures, the reduction process must be speeded up, so the company is offering a slightly sweeter early retirement package to a wider range of employees, Pacific Telesis Chairman and Chief Executive Sam Ginn said. “After nearly two years, it is clear to me we are not reducing as quickly as we must,” Ginn said in a written statement. “Competition in our markets is growing faster than ever. We need to pick up the pace if we are to reach our goal.”
In New York Stock Exchange trading Tuesday, Pacific Telesis stock closed up 62.5 cents per share at $42.75, partly in reaction to the announcement. It remains well below its high of $51 per share in 1990.
The firm is offering incentives, including enhanced pension or severance packages, to encourage managers to retire or quit. The plan, affecting only managers in California, follows three “significant” early retirement offers since 1984, and is the second since the latest job-cutting plan was announced in 1990, according to Pacific Telesis spokesman Mike Runzler.
About 17,200 managers at Pacific Bell, 900 at Pacific Bell Directory and about 300 from the Pacific Telesis parent-company staff are eligible for the early retirement plan. Nevada Bell and other Pacific Telesis subsidiaries will not be affected.
The early retirement offer will be open from Nov. 1 through Nov. 30 and will be the firm’s last such offer to managers, Runzler said.
After April 1, managers who do not take the offer will no longer enjoy a policy of job security for salaried workers that now “ensures a job as long as the employee is willing to retrain or relocate,” Runzler said. As of April, the company said, it can lay off workers “if it is necessary to adjust the force.”
Managers deciding to retire early can choose between a lump sum payment or a pension plan that will add four years to their employment and four years to their age to increase the amount of their pension. Managers too young for retirement can opt for a severance plan that gives a significant portion of their annual salary in a lump sum in addition to whatever pension they normally would be eligible for.
Joanne Smith, an analyst at Nomura Research Institute, said the accelerated job reduction would help Pacific Telesis contain costs. She said she expected the company’s earnings to remain flat for the next several quarters, however.
