Lucent Technologies Inc. (NYSE: LU) is sending former CEO Henry Schacht to face retirees in eight U.S. cities who are enraged over their loss of benefits.
Schacht, who himself turns 69 on October 16, will attempt a dialogue with thousands of pensioners who are "mad as hell" over Lucent subsidy cuts (see Lucent Retirees Ask Questions and Lucent Cuts Retiree Healthcare). Schacht has picked metro areas with the largest concentration of Lucent retirees. At each stop, he'll head up hour-and-a-half sessions, mostly in large conference halls.
While not actually retired from Lucent himself, Schacht has ceased working there full time. Instead, he has been acting as a board member and advisor since Patricia Russo took over as CEO and board chairman in February 2002. On the tour, he will represent an entity called Lucent's Pension and Benefits Task Force.
It won't be an easy trip. The Lucent Retirees Organization (LRO) says its members are "outraged and disgusted" by what they see as Lucent backing down on its commitments after they based career and retirement choices on staying with the company.
Originally, representatives of LRO met with various Lucent personnel, including Russo, but say they were "blindsided" when the company declared earlier this month that it would no longer pay subsidies to dependents of former management workers who retired on or after March 1, 1990, and whose base salary at retirement was $87,000 or more. Lucent's also eliminated dental coverage and Medicare Part B expenses (any doctor visits and outpatient medical care not associated with in-patient stays) for all management retirees and their dependents.
The cuts will affect about 50,000 retirees.
The LRO bristles at Lucent's ongoing payments to executives, which have made headlines in the past (see Lucent Fat Cats Gorge in 2002 and Post-Bubble Arrogance). Schacht himself made a base salary of $1,100,000 in 2002 --relatively modest for a Lucent CEO.
"At the same time Lucent has shrunk to 25 percent of its former size, have executive salaries and perks been reduced proportionately by 25 percent? The answer is no," said LRO president Ken Raschke in a prepared statement. "Lucent executives continue to draw multi-million-dollar salaries, retention bonuses and pensions -- all on the backs of its retirees, without whom there would be no Lucent."
The LRO is considering legal action against Lucent.
Lucent spokesman Bill Price acknowledges that Lucent "thought long and hard" about its benefit cuts, but despite the difficulties, no policy changes are in sight. Instead, Schacht will attempt to reason with the retirees and show them Lucent's still among just 10 percent of U.S. companies that still offer any retiree healthcare at all. Lucent's position is that despite cutting subsidies, it's still offering reduced group rates to retirees, which are "up to half" of what they'd have to pay on their own.
Lucent's retiree population swelled over the years as the company absorbed employees who remained on the benefit roster after the company spun off from AT&T Corp. (NYSE: T) in 1996. It has seen an 85 percent increase in healthcare benefit costs ever since, Price says, amounting to $850 million annually. The ratio of Lucent retirees to employees is 5 to 1; add retirees' dependents and the ratio climbs to 10 to 1.
Bottom line? To keep any retiree health care at all, Lucent is forced to make the choices it has, Price says. "We have to take action to ensure the long-term viability of the business." Without Lucent, there won't be anything for retirees.
As to those executive benefits: Price claims Lucent execs make about 30 percent of what they did even three or four years ago. About 60 percent of executive compensation is tied to options and long-term incentives that have no immediate cash value, he says. What's more, even eliminating all executive pay wouldn't dent the retiree healthcare bill.
Table 1: Henry Schacht Retiree Meetings
|Greensboro, NC||Sept. 30/9 to 10:30 a.m.||Radison Hotel||415 Swing Rd.|
|Somerset, NJ||Sept. 30/3:30 to 5:00 p.m.||Doubletree Somerset Executive Metting Center||200 Atrium Dr.|
|Atlanta, Ga.||Oct. 1/9:30 to 11:00 a.m.||Sheraton Buckhead Hotel||3405 Lenox Rd. NE|
|Orlando, Fla.||Oct. 1/2:30 to 4:00 p.m.||Rosen||9700 International Dr.|
|Boxborough, Mass.||Oct. 2/9:30 to 11:00 a.m.||Holiday Inn Boxborough Woods||242 Adams Place|
|Columbus, Ohio||Oct. 7/10:30 a.m. to Noon||Ramada Plaza Hotel||4900 Sinclair Rd.|
|Lisle/Naperville, Ill.||Oct. 7/2:00 to 3:30 p.m.||Wyndham Lisle Hotel||3000 Warrenville Rd.|
|Allentown, Pa.||Oct. 8/10:30 a.m. to Noon||Days Inn Conference Center||1151 Bulldog Dr.|
— Mary Jander, Senior Editor, Light Reading