The Lucent-Alcatel deal -- in firms' own words Transcripts reveal layoffs, benefits issues By Kevin Coughlin; The Star-Ledger ~ Apr 16, 2006 (Clip and save, then see how it all shakes out.) The $34 billion merger of Lucent and Alcatel announced April 2 would create the largest vendor of telecom networking gear. But many questions -- from how to lay off 8,800 workers to naming the new company -- must be fleshed out as both sides seek approvals from regulators and shareholders in coming months. So far, Lucent executives have provided few details to the public. But filings with the Securities and Exchange Commission, including transcripts of a meeting with employees, provide a behind-the-scenes glimpse of what they're thinking. Here's some of what Lucent has been telling the troops: --Kevin Coughlin ON JOB CUTS Obviously, I can't do anything other than to communicate with you to assuage what I'm sure is uncertainty about what this means with respect to organizations and people. I would be disingenuous if I tried to do that. What I can tell you is that you ought to reserve judgment about what all this means until we're in a position to communicate more proactively with you about how we plan to transition and how we plan to integrate. So what do I mean by that? Just because executive offices are in Paris doesn't mean all corporate functions will be in Paris. -- Chief Executive Pat Russo, addressing Lucent employees April 4 I recognize the personal pain and hardship any type of layoffs can cause and I make this commitment to you: to treat anyone affected fairly and with respect; and to communicate clearly and candidly throughout the process. Our goal is to complete all adjustments within months of closing. -- Alcatel Chief Executive Serge Tchuruk, video address to employees of both companies, April 2 WILL LUCENT BEAR THE BRUNT OF LAYOFFS? So the question about it's impossible to cut jobs in France, I would say that's absolutely flat out not correct. If you look at the reductions that Alcatel has taken as a company and the number of jobs they've reduced in France, I would venture to say it's probably equal to what we've done as a company. Now the processes are a bit more rigorous, and it may take a little bit longer. But nobody should conclude that we will make our decisions based on do-ability. We're going to make the decisions based on what's in the long-term best interests of the company because there really isn't a country in this world that you can't reduce jobs. It's just a matter of how long does it take and what do you have to do to do it. So concluding that all the reductions will come from Lucent is flat out wrong. And concluding that there can't be any reductions in countries where it's tougher, is also flat out wrong. .. I'd been asked a lot of questions about the notion of a French company. And I keep getting people to think of this is really a very global company. -- Pat Russo, addressing Lucent employees April 4 WHAT HAPPENS TO EMPLOYEE BENEFITS? Nothing changes with regard to pension benefits or the pension plans or the responsibilities we have in that regard will continue to be overseen from a U.S. ERISA (Employee Retirement Income Security Act) law standpoint. And then from a retiree health standpoint, the issue of retiree health is an issue that has to do with rising costs of health care and what's affordable. And just as we have said that we have to look at what the costs are, balanced in a way with what's affordable, we will continue to have to do that. So from my standpoint, there really is not a change other than the fact that this company will be part of a larger combined company that's got more scale, more breadth and more capacity. ... Our pensions are adequately funded. What's important to know is, regardless of where the actual parent incorporation of a company is, the company, the subsidiary, in the operations of those companies, have to abide by the laws of the (countries) in which they're doing business. -- Pat Russo, addressing Lucent employees April 4 The pension obligations of Lucent, will continue to remain with what I'll call, the U.S. entity, that is currently Lucent. That legal entity will remain. Those obligations will remain part of that legal entity. -- Lucent Chief Operating Officer Frank D'Amelio, addressing Lucent employees April 4 The assets in support of these (pension) plans are held in trust for the benefit of the plan participants, and that doesn't change. And, there's no access for someone to come in and strip out the assets that support these liabilities. ... -- Lucent Chief Financial Officer John Kritzmacher, addressing Lucent employees April 4 WHAT WILL HAPPEN TO LUCENT'S UNION CONTRACTS? In terms of the CWA contract, the answer is the contract as is continues. ... I want to just broaden it and say that answer applies to the CWA and the IBEW. So the contract we have now continues to apply between now and signing or closure. And then once we close, those contracts stay in effect. So the answer is those contracts will continue to stay in effect. ... We are positioning ourselves for what I'll call extreme financial success, and all constituents of the company benefit when a company is successful financially. -- Lucent COO Frank D'Amelio, addressing Lucent employees April 4 THE FUTURE OF BELL LABS: Bell Labs, the headquarters of Bell Labs, what Bell Labs is remains unchanged. In fact, my hope is that we are able to expand what Bell Labs is and looks like around the world from a research standpoint. Alcatel, of course, and again, when you get involved in these kinds of discussions, you are always reminded of the pride that each company has in its heritage and its identity and its business research and innovation. And they have core research that they do, and they have research centers around the world. And, of course, we have Bell Labs, and you all are familiar with that. So I vision that this is an opportunity to do more from a research standpoint together than either of us could do separately. But make no mistake, we have no intention of dividing up Bell Labs, moving Bell Labs or not having Bell Labs be headquartered exactly where it is. -- Pat Russo, addressing Lucent employees April 4 HOW WILL LUCENT PROTECT THE INTELLECTUAL PROPERTY RIGHTS OF BELL LABS? Lucent considers its patents to be one of its most valuable assets. In fact, Bell Labs scientists and engineers have earned more than 31,000 patents since 1925. And as of September 30, 2005, Lucent owned 7,000 patents in the United States and 8,100 patents in foreign countries. Lucent takes its responsibility to protect its patents very seriously and the combined company will continue to do so. In fact, the way the proposed merger is structured, all of the patents will continue to be owned by Lucent and its subsidiaries. -- Lucent SEC filing WHAT ABOUT THE PATENTS ASSOCIATED WITH GOVERNMENT WORK? Any patents associated with these certain contracts with the U.S. government, will be held by the independent U.S. subsidiary under Bell Labs to further ensure the safeguarding and protection of this sensitive work protect. -- Lucent SEC filing WILL THE MERGER BE TAXABLE TO SHAREHOLDERS? No, the merger is not anticipated to be a taxable event since it is a stock-for-stock transaction. However, you should consult your tax adviser regarding your particular situation. --Lucent Web site WHY WILL THE NEW COMPANY INCORPORATE IN FRANCE? The reason we chose France. ... is because it maximizes our tax value. ... When you look at the various tax laws of the different countries, France was the most favorable for the combined companies. -- Lucent COO Frank D'Amelio, addressing Lucent employees April 4 WHAT'S THE BIGGEST CHALLENGE AHEAD? This is a massive job of integrating two companies. Okay, so when I think about what weight do we now carry around? It's. ... You know, we are two very large global companies, and we have a lot of work to do to get these companies combined .. So our expectations shouldn't be, Day 1, everything is integrated, systems are integrated. It generally doesn't work that way. ... We've gone through radical change, as a company ... I think we have incredibly smart people. Incredibly dedicated people. So, are we up to the task? We're absolutely up to the task. There's no question in my mind. ... It's just the sheer magnitude of all of the things that have to be cared for. ... We have a lot of work to do. We're up to it. ... I'd ask as we go forward, please stay focused on executing the plans we have for 2006. We really need to deliver and demonstrate that on our own we can meet our expectations and do what's expected of us. -- Pat Russo, addressing Lucent employees April 4 ... Emotionally, this is gut-wrenching. By that, I mean we're merging two companies, there are many of us who created this company, and so emotionally, it's gut-wrenching. But the economics and the strategic rationale are overwhelming, and they're overwhelmingly positive... (But) it creates uncertainty, it creates challenges. Our job is to rise above that because it creates huge opportunities. So for each of us, for every one of us individually, this is a huge opportunity to really just hit it out of the park and demonstrate how great a company we can be. We've done that before and I know we will do it again. ... Let's go get 'em! -- Lucent COO Frank D'Amelio, addressing Lucent employees April 3 WHAT ABOUT SERGE? I think I have a very good working relationship with Serge. I have great respect for him; he's tremendously admired by the people of Alcatel, he's a straight-up guy. He unfortunately was going to be here, but can't. He has a family matter he's dealing with, and so he regretted not being able to be here. But I think if you got to know him, you'd like him. And so I think we have good chemistry, and I think we reached an agreement that's compelled by the possibilities we can create together, and we were able to work out the things that were important from our side and from their side. -- Pat Russo, addressing Lucent employees April 4 WHAT WILL THE NEW COMPANY BE CALLED? I could share with you some funny e-mails I've gotten. ... (LAUGHTER) Alcasys, Lucatel, for example. ... I think we have some work to do to look at what's the brand equity. ... What we have said is, it won't be one or the other. ... will be something that is either a combination or a new name. ... I do know that Bell Labs, and the name Bell Labs, Bell Labs Innovation, or Bell Labs Research and Innovation, clearly has value, and I would expect we're going to continue to want to find a way to obviously leverage that. But again, we haven't drawn any decisions on that. -- Pat Russo, addressing Lucent employees April 4 Kevin Coughlin covers technology. He may be reached at kcoughlin@starledger.com or (973) 973-1763. © 2006  The Star Ledger© 2006 NJ.com All Rights Reserved.   return to LRO HOME PAGE