Lucent Plays Scrooge

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Think back to the last time you traded in your car for an upgrade. In the months after the deal was done, how much thought did you give to how the old car was doing? I'll bet not much. I'd wager good money you didn't, say, phone the new owner three months later to make sure he remembered to take the car in for an oil change. The thing about used cars is, once you get rid of one, it becomes somebody else's problem, and you forget about it.

That's fine and dandy when you're talking about used cars. But U.S. industry has developed a troubling habit of late of treating its "used employees" -- retirees -- the same way. The airlines have been the most high-profile offenders in recent weeks, with first United Airlines and then Continental Airlines (NYSE: CAL) deciding to skip their regular pension contributions. But the problem isn't limited to airlines. The Associated Press recently ran a story on telecom equipment maker Lucent (NYSE: LU) and its second round of announced benefits cuts to employees who have already retired.

Take note: This isn't a Bethlehem Steel story (although that would have been bad enough), where prior to being bought out by International SteelGroup (NYSE: ISG), the company told retirees who were as little as a few weeks from retirement that their pensions wouldn't be waiting for them. Lucent is actually changing the rules of the game after the game has ended. Having already promised to provide free health insurance for dependents of retired employees, Lucent is reneging on that offer and saying it will no longer pay the insurance premiums for dependents of management employees who retired up to 14 years ago at a final salary of $65,000 or more. This comes on the heels of a similar cut for higher-paid management employees, announced last year.

Say what you want about the airlines and their pension cuts (I think them unconscionable), at least those companies are on the brink of bankruptcy -- and a dying company can't always afford to play fair. Lucent, on the other hand, is finally emerging from several years of unprofitability, and earlier this month received the promise of an $800 million windfall from an IRS tax rebate. That would be enough to pay the axed pension benefits for more than 16,000 retirees' dependents for nearly a decade.

When a company doesn't treat its own employees fairly, despite having the means to do so, investors beware. Not only does that bode ill for how the company might treat outside shareholders; it also puts the company's ability to recruit and retain new talented employees at risk. And that's bad for business.

For more Foolish coverage of the telecom giant, read:

• Lucent's Lucre
• Lucent in the Slow Lane, and
• Lucent's Rickety R&D

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Fool contributor Rich Smith owns no shares in any of the companies mentioned here.