Hughes Imposes 12-Month Freeze on Executives’ Pay
The thawing of the Cold War in Europe has created a new freeze at Hughes Aircraft--in the salaries of top executives, the company announced Monday.
Hughes Chairman Malcolm Currie, citing an increasingly bleak outlook for the defense market, said the total compensation of senior management executives would be frozen for all of next year, a move that affects about 340 executives.
The company will also delay salary reviews for its 55,000 salaried employees from March until July--effectively deferring regular merit wage increases by four months. Hughes’ 10,000 hourly workers are not affected by the plan.
Hughes declined to say how much it expects to save through the salary moves, but they are just the latest in a long series of austerity steps at the defense firm. It is eliminating 3,000 jobs this year and cut 9,000 jobs in 1989. The firm peaked in employment during the heyday of the Reagan Administration defense program at 82,000 workers.
“It does not mean we are going into the toilet,” company spokesman Ray Silvius said. “We just have to do what is prudent when defense spending is not going to live up to even our own expectations.”
The news was met with surprise within the ranks of affected workers.
“How would you like it if you had a great year, and your boss said, ‘Nice work, but I screwed up and you aren’t going to get a raise this year?’ ” asked one of the executives affected by the freeze. “I would have liked to have seen this handled in a different way.”
Hughes has undertaken one of the most aggressive diversification programs in the aerospace industry, seeking to cut defense work to just half of its sales base during the 1990s. But Monday, the company released some unwelcome news on the commercial front as well.
The firm said it was restructuring the operations of its Rediffusion Simulation Ltd. unit in Crawley, England, which produces flight simulators for commercial airlines, and would take a $40-million charge against earnings in the third quarter.
The restructuring resulted from a weak market, reflecting the downturn of the international airline industry during the Persian Gulf War. Rediffusion will cut employment by 30%. The $40-million charge will result from the writedown of obsolete and excess inventory and from lower-than-anticipated sales.
Hughes acquired Rediffusion in 1988 for $250 million.
