AT&T TO CUT WORKFORCE 120 PERCENT
NEW YORK, N.Y. (SatireWire.com) — AT&T will reduce its workforce by an
unprecedented 120 percent by the end of 2001, believed to be the first time a major
corporation has laid off more employees than it actually has.
AT&T stock soared more than 12 points on the news.
The reduction decision, announced Wednesday, came after a year-long internal review
of cost-cutting procedures, said AT&T Chairman C. Michael Armstrong. The initial
report concluded the company would save $1.2 billion by eliminating 20 percent of its
108,000 employees.
From there, said Armstrong, "it didn't take a genius to figure out that if we cut 40
percent of our workforce, we'd save $2.4 billion, and if we cut 100 percent of our
workforce, we'd save $6 billion. But then we thought, why stop there? Let's cut another
20 percent and save $7 billion.
"We believe in increasing shareholder value, and we believe that by decreasing
expenditures, we enhance our competitive cost position and our bottom line," he added.
AT&T plans to achieve the 100 percent internal reduction through layoffs, attrition and
early retirement packages. To achieve the 20 percent in external reductions, the
company plans to involuntarily downsize 22,000 non-AT&T employees who presently
work for other companies.
"We pretty much picked them out of a hat," said Armstrong.
Among firms AT&T has picked as "External Reduction Targets," or ERTs, are Quaker
Oats, AMR Corporation, parent of American Airlines, Callaway Golf, and Charles
Schwab & Co. AT&T's plan presents a "win-win" for the company and ERTs, said
Armstrong, as any savings by ERTs would be passed on to AT&T, while the ERTs
themselves would benefit by the increase in stock price that usually accompanies
personnel cutback announcements.
"We're also hoping that since, over the years, we've been really helpful to a lot of
companies, they'll do this for us kind of as a favor," said Armstrong.
Legally, pink slips sent out by AT&T would have no standing at ERTs unless those
companies agreed. While executives at ERTs declined to comment, employees at those
companies said they were not inclined to cooperate.
"This is ridiculous. I don't work for AT&T. They can't fire me," said Kaili Blackburn, a
flight attendant with American Airlines.
Reactions like that, replied Armstrong, "are not very sporting."
Inspiration for AT&T's plan came from previous cutback initiatives, said company
officials. In January of 1998, for instance, the company announced it would trim 18,000
jobs over two years. However, just a year later, AT&T said it had already reached its
quota. "We were quite surprised at the number of employees willing to leave AT&T in
such a hurry, and we decided to build on that," Armstrong said.
Analysts credited Armstrong's short-term vision, noting that the announcement had the
desired effect of immediately increasing AT&T share value. However, the long-term
ramifications could be detrimental, said Bear Stearns analyst Beldon McInty.
"It's a little early to tell, but by eliminating all its employees, AT&T may jeopardize its
market position and could, at least theoretically, cease to exist," said McInty.
Armstrong, however, urged patience: "To my knowledge, this hasn't been done before,
so let's just wait and see what happens."
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