WAYNE, N.J. Two hundred fifty employees will keep their jobs at Nortel after the company announced Thursday (Sept. 30) that it will cut fewer employees as part of a proposed reorganization plan. At the same time, the Ottawa-based telecom equipment provider said it would evacuate 2 million square feet of office space once its restructuring efforts designed to slash costs are completed.
Nortel caught headlines in mid-August when CEO William Owens announced a sweeping reorganization that included big changes in the of employee and executive teams. During the announcement, Owens said that the company would cut an additional 3500 employees from its worldwide workforce. However, in Thursday's announcement, Nortel revised its employee cutback totals, claiming that it would now only release 3,250 employees.
Nortel's announcement also provided insight into where the cutbacks would happen. The US will take the biggest hit, with 1400 employees losing their jobs. Canada will see a 950-employee reduction while Europe, Middle East and Africa will see a 650-employee cutback. The remaining 250 employees will be cut from other regions of the world, Nortel said.
"Our workforce actions are focused to disproportionately protect customer and sales facing roles as well as continue our focus on new innovative solutions," said Bill Owens, president and CEO of Nortel. "The work plan outlined today will allow us to trim our cost structure by streamlining our business to drive more efficient operations."
In addition to insight into its headcount reductions, Nortel also talked about real estate changes that would help the company reduce overall costs. Nortel said it would abandon approximately 2 million square feet of occupied space as a result of the workforce reductions and improved space utilization through consolidation of locations. This real estate reduction, the company said, will lead to a $230 million charge to the company's income statement.
Through its employee and real estate reductions, Nortel expects to achieve cost savings of approximately $500 million in 2005. The company said these savings will increase on an annualized basis beyond 2005 as the full impact of the work plan is realized.