This excerpt taken from the HPQ 8-K filed Jul 19, 2005.
To improve costs, the company plans to reduce its workforce over the next six quarters by 14,500 employees, or about 10 percent of its regular full-time staff, and modify its U.S. retirement benefits programs. Beginning in fiscal 2007, HP expects approximate ongoing annual savings of $1.9 billion, composed of $1.6 billion in labor costs and $300 million in benefits savings. In fiscal 2006, HP expects savings of between $900 million and $1.05 billion.
Approximately half the savings will be used to offset market forces or reinvested in the business to strengthen HPs competitiveness. The remainder is anticipated to flow through to operating profit.
HP expects to record pretax restructuring charges of approximately $1.1 billion over the next six quarters, beginning in the fourth quarter of fiscal 2005. This excludes a previously announced $100 million restructuring charge to be taken in the third quarter.
HP will carefully target staff reductions. Reductions in sales positions will be minimal, so that HP can continue to provide world-class service and avoid
impacting customers; and there will be little change to headcount in research and development, to ensure that the company remains a leader in technology innovation. The majority of staff reductions will come in support functions, such as information technology, human resources and finance. The remainder will be made inside business units, in areas where work can be reduced by improving processes and re-prioritizing existing tasks. To facilitate these reductions, HP will offer a voluntary retirement program to longer-serving staff based in the United States.
Headcount-reduction plans will vary by country, based on local legal requirements and consultation with works councils and employee representatives, as appropriate.
In addition, HP is modifying its U.S. retirement programs to better match industry benchmarks. As of January 2006, the company will freeze the pension and retiree medical-program benefits of current employees who do not meet defined criteria based on age and years of company service. Instead, HP will increase its matching contribution to most employees 401(k) plans to 6 percent from 4 percent.
These changes will not affect benefits currently received under such programs by retirees or eligible employees who are longer-serving and close to retirement age. Additionally, existing employees will retain the benefits they have already earned.