Cambridge, Mass.-based Polaroid Corp. is trying to stave off a bankruptcy filing by drastically reducing health benefits for employees and retirees, the Boston Globe reports.
In recent memos to both groups, the company said worker contributions to health care premiums would soar to about 50 percent from about 20 percent.
The Globe said it had obtained copies of the memos.
"In total, the company has been paying about eighty percent of the medical plan costs," Paul Lambert, Polaroid's senior vice president for restructuring, wrote in a July 11 memo to retirees. "We can no longer afford that level of contribution for 2001 and the company is reducing its contribution. ... Therefore, employee and retiree medical contributions will increase substantially, beginning October 1, 2001."
Lambert, the Globe reported, wrote that changes in benefits, including reductions in health insurance payments, would save the company $20 million a year.
The changes affect 3,500 U.S. employees and thousands of retired workers, according to the newspaper.
The reduced health benefits came as a double shock to Polaroid's retirees, because the company announced last summer that it was requiring increased health care contributions.
The company had planned to increase its contribution for retired workers by 2 percent each year for 10 years, according to the July 11 memo.
"Given the current financial status of the company, we realize we can not maintain our financial strength without making some difficult changes," Lambert wrote.
Polaroid is indeed under extreme financial pressure, according to the Globe. It owes about $600 million to investors who bought the company's bonds, and about $350 million to two groups of banks. The company missed bond interest payments in July and August and says it will miss a payment to its banks later this month. At this point, a minority of the bond holders could force the company into U.S. Bankrutpcy Court.
Polaroid has reached interim agreements with the banks and with some of the bond holders, but it is also looking for buyers for some or all of the company.
The deep cut in health benefits shows that Polaroid "is in dire financial straits," said Dallas Salisbury, president of the Employee Benefits Research Institute, a private non-profit group in Washington, D.C. "The only point at which companies have taken this type of Draconian action is at the point they're concerned about actual survival," he told the Globe.
Skip Colcord, a Polaroid spokesman, said the company had no choice but to cut benefits. "It's a matter of trying to balance what's fair to employees versus what the company can afford in the current economy," he said.
The increased health premium co-payments affect all employees, including Gary T. DiCamillo, the chairman and chief executive, Colcord said. "There's no caste system involved," said Colcord.
