Disney stops paying 100,000 workers to save $500m

Walt Disney will stop paying more than 100,000 workers this week, almost half its workforce, as the world’s largest entertainment company tries to overcome the coronavirus blockage.

Suspending the wages of thousands of so-called cast members will save Disney up to $ 500 million a month at its theme parks and hotels, which have been closed in Europe and the United States for nearly five years. weeks.

But cutting fixed costs more severely than other theme park owners such as NBCUniversal and Warner Media has raised significant reputational risks for the century-old empire behind Mickey Mouse.

The decision leaves Disney staff dependent on state benefits – public support that could reach hundreds of millions of dollars in the coming months – even as the company protects executive bonus plans and a dividend of 1 , $ 5 billion owed in July.

On the other hand, some large multinationals, including L’Oréal and Total in France, have promised to give up state aid in solidarity with taxpayers.

In the past month, Disney has raised debts and signed new credit facilities, leaving the company with approximately $ 20 billion in cash to use in the event of a downturn. “They could afford [not furloughing staff]”said Rich Greenfield, analyst at BTIG.

However, he warns that Disney is likely prepared for a “very long shutdown.” Last year, Disney earned nearly $ 7 billion in operating revenue from its parks, experiences and products activities, which accounts for almost half of all operating profits. Disney shares have declined a quarter since the virus epidemic.

“With the workforce accounting for about 45% of operating expenses and 33% of total expenses, we assume significant savings,” said Alexia Quadrani of JPMorgan, who estimates that leave, along with other cuts costs, will save Disney about $ 500 million a month.

Disney will provide comprehensive health benefits to staff on leave without pay. As of April 19, he urged employees to request the additional $ 600 in federal support per week available through the $ 2 billion coronavirus recovery program.

In Orlando, home to over 70,000 Disney cast members, Florida offers unemployment benefits of up to $ 275 per week for 12 weeks – among the lowest rates in the United States.

The payment of salaries will also be interrupted for most of the 17,000 employees of Disneyland Paris, who will be placed under the “partial activity regime” of France. This allows companies to reduce the hours of work or hours of work for employees while the government covers up to 84 percent of their net salary.

Some union representatives assaulted Disney for failing to increase government support. “Will we have Disney +?” asked the CFDT union, noting that the managers were “undoubtedly much more comfortable than most of the company’s employees”.

Djamila Ouaz, representative of the CFDT, recognized the relatively better position of the staff in Paris. “We are in France, so we have unions and legal rights to defend ourselves,” she said. “In the United States, it’s a disaster.”

Disney executives have made salary sacrifices to “better enable the company to meet extraordinary business challenges.” Bob Iger, Executive Chairman, has given up the rest of his $ 3 million salary for this year, while Bob Chapek, who recently replaced Iger as CEO, will give up half his base salary from $ 2.5 million.

Disney has incentive plans in place, which account for the bulk of executive compensation. Mr. Iger earned $ 65.6 million in 2018 and $ 47 million last year, the latest package being more than 900 times that of the Disney worker’s median salary, which is approximately $ 52,000.

Mr. Chapek could potentially earn an annual bonus “of at least 300 percent” of salary, in addition to a long-term incentive bonus “of at least $ 15 million”.

Speaking at the Disney shareholders’ meeting in March, Mr. Chapek said, “Our ability to do good in the world begins with our players. . . who create magic every day. Our commitment to them will always be our top priority. “

Additional report: Domitille Alain in Paris