Viacom Cuts 850 Jobs, Sets Salary Freeze

Written by Ryan Lawler

Thursday, December 4. 2008 at 10:45 AM EST Post a comment

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The weak economy has hit Viacom Inc. (NYSE: VIA), forcing the company to cut staff by 850, or 7 percent of its workforce, as part of a new restructuring plan.

In a press release issued this morning, the company said that, in addition to the personnel cuts, the company would suspend senior management pay increases and would write down certain programming and other assets.

Altogether, the company will face a pre-tax charge of approximately $400 million to $450 million, or 42 cents to 48 cents per share, in its fourth-quarter earnings report. The good news is that the reductions will result in savings of $200 million to $250 million in 2009.

Viacom, which owns media properties including Paramount Pictures Corp. , MTV Networks , Comedy Central, Nickelodeon, and BET, still says it has a "strong hand to play" in the weakening economy.

However, an internal memo from Viacom CEO Phillippe Dauman and chief administrative officer Tom Dooley to staff claims the need to adapt in the face of a recession: 

Dear Colleagues:

With less than a month until the close of 2008, our entire organization continues to do everything possible to anticipate and adapt to the unprecedented changes affecting all our businesses. We know it hasn't been easy and we couldn't be more proud or more appreciative of how you have risen to the challenge.

Even in these tough economic times, Viacom has a strong hand to play. We have a broad stable of outstanding brands, diverse revenue streams and an impressive global footprint, backed up by exceptional financial strength. Added to that we have talented employees, extremely able leaders and a creative ingenuity that runs deep.

Unfortunately, our advantages and best efforts can't completely protect Viacom from the very serious and broad-based challenges of this economic recession. Viacom's long-term health will depend on our shared commitment to adapt, to innovate and to make difficult choices. To compete and thrive, we need to create an organization and a cost structure that are in step with the evolving economic environment.

Today, we are announcing a company-wide restructuring plan that includes staffing reductions in all divisions. This will result in a reduction of our worldwide workforce of approximately 7 percent, or about 850 positions. We are also suspending salary increases for the Company's senior level management in 2009. In addition, after a comprehensive review of our operations, we will write down certain programming and other assets. These three actions will bring us significant cost savings and other efficiencies.

Top managers at every part of the company worked thoughtfully, carefully and compassionately to create a leaner, more focused organization. It was not an easy task, but it was an essential step that will keep Viacom at the competitive forefront today and tomorrow. Department heads and supervisors will provide you with more information about the changes that will be taking place in your division.

Saying goodbye to friends and colleagues is always difficult, particularly when we have shared so much. Those of you who will be leaving should be proud of your contributions, which we will always respect and appreciate. We thank you and we wish you the best.

The true measure of an organization is how it deals with change and overcomes challenges. We know that you are up to the task and that together we will push through the difficulties ahead and go on to even greater achievements.

We truly appreciate your continued commitment and hard work and we thank you for everything you do each day.

Sincerely,

Philippe and Tom