The Association of U S West Retirees



Lucent Retirees Seek to Protect Pensions in Alcatel Merger Talks
By Sara Silver
The Wall Street Journal
Friday, March 31, 2006

Retirees of Lucent Technologies Inc. are threatening to ask the U.S. government to block its potential merger with Alcatel SA of France unless the combined entity agrees to protect their pensions and benefits.

The Lucent Retiree Organization is demanding that any merged entity guarantee that their pensions and benefits "will be carried forward and their pension plans will always be fully funded."  It is also threatening to ask government regulators not to approve any merger unless the pension plan has fiduciaries independent of both companies.

At the heart of the dispute is the company's $34 billion pension plan, which covers 20,000 U.S. employees and 120,000 U.S. retirees.  With $2.7 billion more in assets than liabilities, the pension plan is an important resource to Lucent because the assets contribute accounting income that boosts quarterly profits, and because part of its assets legally can be used to pay for retiree medical benefits.

"No one should want a foreign company to own a $34 billion pension fund -- worth more than twice Lucent's market value -- unless safeguards are in place to protect the pension and benefits of 235,000 retirees and their dependents," said Ken Raschke, president of the retiree group.  The current value of Lucent's stock is $13.8 billion.

Lucent declined to comment.

The companies have been holding talks to merge, reportedly into a French-based company to be headed by Lucent's current chief executive, Patricia Russo.  Alcatel is holding a board meeting on Saturday to take up the issue.

Alcatel is also trying to conclude longstanding talks aimed at folding its satellite activities into French defense electronics company Thales SA prior to a deal with Lucent.  But European Aeronautic Defence and Space Co., the parent of Airbus, reportedly wants its Astrium satellite unit to be involved in any consolidation.

French Finance Minister Thierry Breton said Friday the government would back a satellite deal involving Alcatel, Thales and EADS.  "If the companies consider that it's in their interests, then of course we're favorable,'' Mr. Breton said at his quarterly news conference on the economy.

The Lucent Retiree Organization says it represents the interests of retirees and their dependents of Lucent, its Bell Labs, plus those who retired from Western Electric and AT&T Network Systems.

Relations between Lucent and its retirees have grown frosty in recent months.  Shareholders voted in February to approve a retiree-sponsored measure tying executive stock grants to company performance.  Later, Lucent's general counsel said the company would no longer have direct contact with the retiree group because it was supporting "multiple lawsuits against the company," according to a letter posted on its Web site.

--The Associated Press contributed to this article.

Write to Sara Silver at