Nortel Networks to Trim 1,100 Jobs

Telecommunications equipment maker Nortel Networks Corp. (NT), which has slimmed down significantly in recent years, said Tuesday it will cut about 1,100 positions globally and change its pension program to improve operating margins and save money.

As part of a previously announced restructuring plan, the Toronto-based company said it will cut 1,900 posts globally but add 800 new positions at new operations centers in Mexico and Turkey. The company currently employs 35,000 overall.

About 1,200 of the job cuts will come as the company consolidates its operations centers. Nortel also plans to eliminate 350 middle-management positions and cut 350 other positions in business units globally.

Restructuring costs are expected to total $100 million over the next two years, about $35 million of which will be recorded in the second quarter. Annual savings from the cuts are targeted at $100 million in 2007 and $175 million by 2008.

Beginning Jan. 1, 2008, Nortel will also change its defined-benefit pension plan to a defined-contribution program, a step that many other large companies have taken to reduce the uncertainties surrounding traditional pensions. Current retirees will see no change.

Nortel also will eliminate post-retirement health care benefits for many current staffers as of July 1.

Nortel estimates it will save $100 million in annual pension expense with the changes starting in 2008 and more than $400 million in cash by 2012.