AT&T Plans Cutback of 40,000 Jobs

WASHINGTON -- In one of the largest layoffs in the history of American industry, AT&T Corp. said it would cut about 40,000 jobs as it prepares to split itself into three companies and take on an array of new competitors in the fast-changing telecommunications business.


AT&T, which in September announced the biggest voluntary corporate breakup in U.S. history, said Tuesday it would take a pre-tax charge of $6 billion to cover the costs of the downsizing.


About 30,000 of the job cuts will be involuntary, with three-quarters taking place this year and the remainder spread over the following two years. AT&T currently has about 300,000 employees.


Wall Street, in keeping with its cheerful attitude about layoffs, sent AT&T's shares up $2.625 to close at $67.375 on the New York Stock Exchange.


The news of the layoffs led the Dow Jones Industrial Average up more than 60 points as investors bet that profit-sweetening job cuts, though perhaps not as dramatic as AT&T's, would remain in vogue among large corporations.


While such measures have proven highly effective in boosting profits, some economists -- pointing to indicators such as weak retail sales -- now fear the job-reduction trend may be damaging the economy as a whole.


AT&T last fall announced a radical plan to divide itself into three companies -- one to provide telecommunications services, one to sell telephone equipment, and a third to focus on computers -- and said at the time that significant job cuts were likely.


In addition, telecommunications-reform legislation now pending on Capitol Hill would allow the powerful Baby Bell companies into the long-distance telephone business, creating a formidable new set of competitors for AT&T and increasing the pressure to cut costs.


Still, the size of layoff announced Tuesday surprised many -- including the union that represents about 80,000 AT&T employees.


"This is yet another case of the kind of mindless job destruction that has terrorized working Americans in recent years as corporate executives play to Wall Street and manipulate their stock prices," said Communications Workers of America president Morton Bahr in an angry statement.


But AT&T chairman Robert E. Allen said the move was necessary to sustain the company's longterm competitiveness.


"The reduction in our work force will be the most difficult and painful step we've had to take in this restructuring process," Allen said. "This is a key milestone that puts us right on trace in our plan to create three new companies that will be positioned as strongly as possible to succeed in their markets."


Analysts said the AT&T job cutbacks were the third largest in history behind IBM Corp.'s elimination of 63,000 jobs in 1983 and Sears, Roebuck & Co.'s slashing of 50,000 jobs that same year.


However, while the flow of pink slips has generally slowed in corporate America since hitting its 1993 peak of 513,000, analysts say layoffs in the telecommunications industry have only just begun.


AT&T's layoffs came five years after the company's last major work-force reduction, when about 12,000 workers accepted buyouts.


Since announcing its plan to split into three separate companies, AT&T's share price has risen about $10, amounting to an increased market value of $16 billion.