YOU ARE HERE: LAT HomeCollections

IBM Hopes Incentives Will Help Trim U.S. Work Force

September 13, 1986|Associated Press

NEW YORK — International Business Machines, striving to cut costs in a period of weak demand for its computers, on Friday announced new retirement incentives for its U.S. work force.

IBM said the incentives, along with normal attrition and limited hiring, should help cause the company's U.S. employment to fall by at least 8,000 next year.

The early retirements should add roughly $200 million to the company's profits next year and roughly $300 million each year thereafter, said analyst Rick Martin of Sanford C. Bernstein & Co.

IBM has cut expenses to the bone, and a retirement incentive plan was the only cost-saving measure left to the computer giant short of breaking its cherished no-layoff tradition, Martin said.

'Very Good News'

"It's very good news," Martin said. Layoffs might help profits in the short run but would hurt IBM in the long run by disrupting the company's high-tech work force and driving a wedge between management and labor, said Martin, who worked for the company for 14 years until 1981.

IBM needs to reduce employment because it overhired and overbuilt in the early 1980s in expectation that business would be better than it is, most analysts agree.

"The 1986 retirement incentive is part of IBM's continuing efforts to improve the company's competitive strength by reducing costs and balancing resources. It also will help preserve IBM's full-employment tradition," the company said in a news release.

IBM had 242,241 U.S. employees at the end of 1985, and its work force is projected to decline by about 4,000 this year as a result of normal attrition and limited hiring, the company said.

The incentive plan takes effect Oct. 1. All IBM employees who retired in 1986 before Oct. 1 will have their benefits recalculated as though they had taken the early retirement incentives, IBM said.

Add 5 Years in Calculations

The incentives make more employees eligible for retirement and improve the retirement benefit for those choosing to participate. To calculate benefits, IBM will add five years to both the actual age and service record of employees as of Dec. 15, IBM said.

Employees must notify IBM by Dec. 15 of their decision to participate and should retire no later than June 30, 1987, the company said. IBM said the decision to retire under the incentive is voluntary.

IBM spokeswoman Pamela Hawkins said the company expects "minimal" harm to its third-quarter earnings from the costs of the incentive program. She said the added pension costs will be amortized over a long period.

The additional costs in health and medical benefits will be accounted for in the third quarter, but they will be "substantially offset" by surpluses in the trust fund, she said.

Los Angeles Times Articles