Circuit City is firing 3,400 employees (8% of Circuit City's total work force) and bringing in lower-cost workers to fill their roles. The company says that the move is aimed to help realign its cost and expense structure. The move comes after Circuit City announced in February that it was closing 62 stores in Canada along with seven underperforming stores in the United States. Employees will be given four weeks' worth of severance pay and will have the option of reapplying for their positions at a lower pay grade after a 10-week hiatus. Circuit City also plans to outsource its IT infrastructure operations to IBM in order to reduce costs by roughly 16%. This separate move will affect an additional 130 employees - 50 of which will become IBM employees while the other 80 will be fired.
"These actions represent the execution phase of the work initiated this winter to accelerate Circuit City's transformation. We expect to deliver improvements in our selling, general and administrative expense rate while maintaining appropriate investments to drive our key strategic initiatives such as digital home services, multi-channel and home entertainment. Unfortunately, a number of Associates are directly impacted by the actions, but we are making Circuit City stronger for the long term," said Philip J. Schoonover, chairman, president and chief executive officer for Circuit City.
News source: DailyTech