B&D trims salaries, 401(k) contributions

Hourly workers' rates not affected, toolmaker says

March 14, 2009|By Hanah Cho | Hanah Cho,hanah.cho@baltsun.com

Power tool maker Black & Decker Corp. is cutting salaries and suspending 401(k) matches for U.S. employees in response to the global recession and declining revenues, the company said yesterday.

Starting with the first pay period in April, the Towson company said base salaries of top executives will be cut by 10 percent, salaried employees by 5 percent, and salaried workers who qualify for overtime by 2.5 percent.

Black & Decker Chief Executive Officer Nolan D. Archibald, who made $11.1 million in total compensation in 2007, will likely take a $150,000 cut from his $1.5 million base salary.

The wage cuts do not affect hourly workers at the company's plants and distribution centers, spokesman Roger A. Young said.

"The thinking is that a lot of these people are experiencing a reduction in hours worked," Young said. "We didn't think it would be appropriate for them to have additional cuts in hourly rates."

Black & Decker "intends to implement similar cost-cutting actions wherever possible throughout its worldwide business," the company said in documents filed with the Securities and Exchange Commission.

The company will also put on hold its match on employee contributions to its 401(k) program and supplemental retirement savings plan. The company matched half of employees' 401(k) contributions up to 6 percent, Young said.

The moves come after the toolmaker cut 1,200 jobs worldwide earlier this year in anticipation of steep sales declines during the coming quarters.

That was the latest round of job cuts for Black & Decker, which employed about 22,100 at the end of last year, down from about 25,000 in 2007.

The company has 1,500 workers in the Baltimore region.

Black & Decker is not alone in suspending 401(k) matches, reducing salaries and taking other cost-cutting measures to deal with slumping economic conditions. More employers are expected to take similar actions this year, according to human resources consulting firm Watson Wyatt.

"We've taken some rounds of employment-level reductions, and at this point, we thought it was appropriate to take cost actions that will hopefully reduce the need for further head count reductions," Young said.

The company said it will disclose savings from these moves during its first-quarter earnings conference call next month. It plans to re-evaluate its base salary cuts and 401(k) match freeze at the end of the year.

Young said employees affected by the pay reductions will receive five additional paid days off this year.

About two-thirds of the job cuts announced in January were in manufacturing, mostly at a plant in Mexico. Employees at plants in Asia, Tennessee and California were also affected. A small number in the Baltimore area were affected, though the company did not provide specific numbers.

The company, whose business is heavily dependent on housing and auto markets, reported a 77 percent decline in earnings in the fourth quarter.

Earnings were $43.7 million, or 73 cents per share, compared with $187.4 million, or $2.94 per share, for the corresponding period a year ago.

Sales in the quarter decreased 17 percent to $1.4 billion, with actual declines exacerbated by a strengthening of the dollar.

Shares of Black & Decker rose 13 cents to close at $24.01 in trading on the New York Stock Exchange yesterday. The stock price is down about 64 percent from a year ago.

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