Economy Troubles Forces Motorola To Freeze Pensions, Salaries

The economy is having a global effect as companies scramble to make sense of an economic situation that is slow to improve. Motorola has also said it is cutting the pay of top executives in their ailing wireless-phone division as well.

It’s been rumored that Motorola’s long-term survival is in doubt, and that the company has lost a huge chunk of its wireless business to competitors who have responded quickly to the needs of consumers. Motorola’s flagship or core business used to be the wireless industry, but in recent years the company has suffered from poor business strategies and products inefficiencies.

These current steps are in response to $800 million cost saving initiatives reported in October by Motorola. Motorola’s stock is currently trading at $4.35 a share.

"The sustained downturn in the global economy requires that we take these difficult but necessary steps," said Greg Brown and Sanjay Jha, co-chief executive officers, in a statement.

Both Brown and Jha are sacrificing their cash bonuses this year. Jha in turn will obtain restricted stock options from Motorola in lieu of a bonus.

Any benefits that have already been earned or vested by employees will still be allowed, but Motorola is eliminating any benefit accruals in the future. Many Motorola employees will not receive raises in 2009. The freeze will also hurt older and retired workers, which will feel the effect of a frozen pension plan beginning March 1, 2009.

There have been reports that due to Motorola’s shrinking market share in the wireless industry, that the company is planning to spin the division off into a separate company and focus on its other remaining businesses. However, those plans have been put on the back burner due to lack of investor enthusiasm.