Pacific Bell, seeking to trim costs and gain staffing flexibility, said Wednesday that it has offered its 17,500 management employees substantial bonuses to take early retirement by the end of the year.
No layoffs are contemplated, said Ginny Junke, a Pacific Telesis spokeswoman. "We're committed to not laying off." An industry analyst estimated that the company is trying to cut its management ranks by 1,000 to 2,000 employees.
Since Pacific Telesis was created in 1984 with the breakup of the old Bell System, it has decreased its work force to about 75,000 from more than 80,000. About 66,500 of those employees are with Pacific Bell.
About 17,500 Pacific Bell managers and 190 Pacific Telesis headquarters managers are eligible for the new program, she said.
"We considered the needs of our managers and the business in creating this voluntary retirement package," Philip J. Quigley, company president and chief executive, said in a letter sent to employees this week. "We reviewed the present and anticipated business environment and concluded that streamlined operations would contribute to the continued good health of Pacific Bell."
Pacific Bell in March was ordered by the California Public Utilities Commission to trim its rates by $191 million a year, effective last May 1, but Junke said overstaffing in some areas and understaffing in others--and not the rate cut--triggered the retirement-incentive program.
Despite Junke's comment, the company said at the time that the PUC decision "overestimates the effect on our revenues of growth while underestimating the expenses which growth forces Pacific to absorb." PacBell agreed that some reduction was justified because of improved productivity and low inflation and interest rates, but sought only a trim of $75.7 million, far less than the $191 million that the PUC ordered.
Robert B. Morris III, telecommunications analyst with Prudential-Bache Securities Inc., welcomed the action. Morris attributed the cost-cutting move to the rate decision and factors such as increasing telecommunications competition and continued management overstaffing inherited from the Bell System.
"The company is stuck with lower revenue and has to look seriously at lowering its total cost structure in the future," he said. He estimated that the company is expecting "between 1,000 and 2,000" employees to take advantage of the retirement incentives.
About 1,200 managers took advantage of a similar early retirement program in 1985.
The new retirement program, as outlined by Quigley, applies to managers with as few as five years of service. These employees could add five years to their service to become eligible for a pension payable as either a lump sum immediately or as a monthly annuity at age 65.
More experienced managers become eligible for early retirement if adding five years to age and service gives them 30 years of service at any age, 25 years of service at age 50, 20 years of service at age 55 or 10 years of service at age 65.
Finally, employees with at least 20 years of service by Dec. 31 are eligible for an immediate monthly pension based on actual service time.
The 1985 incentives were less generous, Junke said. They added three years instead of five to age and service in assessing eligibility for early retirement.