Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Jason Miner – Deutsche Bank
Jason Miner – Deutsche Bank
On some of the savings I wonder how much will full year ’09 earnings benefit from the 5% cut you guys made to salaries? Conversely maybe asked another way, how much would it add back costs if salaries across the board went back to ’08 levels?
Jim Rogers
We just happened to have been looking at that subject. We did take some extraordinary actions this year and I think we did it fairly quickly. I think we did it at the right level. I love our culture that we had the option of doing something like a pay reduction instead of having to let a lot more people go, people who actually contribute value and do meaningful work. It’s my setup to say that. I believe we did the right thing. You don’t have all the one time charges when you do a pay reduction.
There was $200 million of savings there and actually how it feeds into the year and how much of it we go during the year that was more of an annualized number. We would have had most of that in this year. As I look going forward you can’t keep those extraordinary measures forever so I would expect it’s quite likely we will be reversing some of those extraordinary measures including the pay reduction around year end. We’re still waiting to get a little more visibility into the fourth quarter and next year before we make a final decision.
As we look at that and maybe a couple other things that’s probably $40 million on an annual run rate that if you roll it all together that you would expect to put back in place. I would guess there’s another $50 to $60 million and that’s just a ballpark of savings that are tied more to volumes. When the volume comes back you would hire back the contractors, etc. You have to lighten up a little bit on some of the spending constraints because eventually people have got to travel you’ve got to let them spend a little bit of money.
There’s at least a good solid $100 million that sticks to your ribs going forward. The other thing I’d say is we don’t talk a lot about it but we’re trying to continue to be very disciplined so since that reduction in force we had in the spring we’ve allowed attrition to run ahead of hiring almost at a ratio of 10:1 such that by end of year I’d expect we’ll be down another 2% in our headcount which again you’re not paying any severance charges, we’re very conscious of cash but you are reducing your ongoing costs. I guess that wraps up how we’re looking at the cost savings we obtained and what we have to overcome as we move from ’09 to 2010.
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