Nortel cuts another 3,200 jobs

http://www2.canada.com/aboutus/help/nortel+cuts+another+jobs/1328160/story.html?id=1328160

Summary
Nortel Network Corp. is one of the biggest ailing telecom equipment makers in the world. This companied employed over 90,000 people in 2000 when technology was booming. But with the recession happening, they have been cutting employees since January. Just last Wednesday they cut another 3,200 workers world wide. But that is not the end of laying off employees according to Zafirovski the Nortel Chief Executive. Duncan Steward who is an analyst at DSAM Consulting analyzed Nortel and said in order for it to keep running it needs to have at least 15,000 to 18,000 people working. Not only are they making cuts, they are also reducing bonuses and cutting equity based compensation plans. Last month Nortel filed bankruptcy protection for Canada and United States.

Connections
In this article it talks about people being cut and being unemployed. Nortel is making big cuts is because the recession rate is the lowest since the Great Depression. The reason why Nortel made abundant of cuts is because the demand for their product has dropped a significance amount. With less demand for their product, it is no surprise they need to cut down on employees in order to make profit. But with cutting down on employees it increases the unemployment rate causing consumers to consume even less. This leads to the CPI rate to be low because people no longer have the money to purchase goods.

Personal Reflections
Nortel is making a decision that many other companies are making in order to save their company’s. I don’t think that it is necessarily a good idea for Nortel or any other companies to cut back on so many employees even if we are in a recession. If less people are being cut then more people will be employed, and less will be unemployed. Which would result with people having money extra money to purchase goods, demands for goods will increase, and employees will be needed again. Also if there are a huge number of unemployed people it can be bad cause there can be structural unemployment.