9. Post-Petition Date cost reduction activities

In connection with the Creditor Protection Proceedings, Nortel has implemented certain workforce and other cost reduction activities and will continue such activities during this process. The actions related to these activities are expected to occur as they are identified. During the third quarter of 2011, Nortel filed a motion with the Canadian Court to approve a methodology that includes, among other matters, an amount for employees' severance claims. The motion was approved on October 6, 2011. The workforce provision was adjusted to reflect the severance claims amount under the approved methodology. The current estimated total charges to earnings and cash outlays are subject to change as a result of Nortel's ongoing review of applicable law. In addition, the current estimated total charges to earnings and cash outlays do not reflect all potential claims or contingency amounts that may be allowed under the Creditor Protection Proceedings and thus are also subject to change.

Workforce Reduction Activities

Year ended December 31, 2011

For the year ended December 31, 2011, approximately $20 of the total charges relating to the net workforce reduction of 475 positions were incurred. During the third quarter of 2011, approximately $81 was recorded in relation to the Canadian severance claims adjustment noted above. As Nortel continues to progress through the Creditor Protection Proceedings, Nortel expects to incur charges and cash outlays related to workforce and other cost reduction strategies. Nortel will continue to report future charges and cash outlays under the broader strategy of the post petition cost reduction plan.

Year ended December 31, 2010

For the year ended December 31, 2010, approximately $49 of the total charges relating to the net workforce reduction of 1,703 positions were incurred as of December 31, 2010, which substantially completes the workforce and other cost reduction strategies discussed above.

During the years ended December 31, 2011 and 2010, changes to the provision balances were as follows:


Provision balance as of December 31, 2009	$	70
Other charges		54
Revisions to prior accruals		(5	)
Cash drawdowns		(15	)
Foreign exchange and other adjustments		2
Impact of deconsolidation of U.S. Subsidiaries		(58	)

Provision balance as of December 31, 2010 ^(a)	$	48


Other charges		20
Cash drawdowns		(8	)
Foreign exchange and other adjustments		(1	)
Adjustment for workforce provison severance claims		81

Provision balance as of December 31, 2011 ^(b)	$	140

(a)	As of December 31, 2010, $47 was included in liabilities subject to compromise and $1 was included in the short-term provision balance.

(b)	As of December 31, 2011, $139 was included in liabilities subject to compromise and $1 was included in the short-term provision balance.

During the years ended December 31, 2011 and 2010, the workforce reduction charges were as follows:


	2011		2010
Cost of revenues	$	4	$	14
SG&A		14		25
R&D		-		10
Other ^(a)		83		-

Total workforce reduction charge	$	101	$	49

(a)	Primarily relates to an adjustment for workforce provision severance claims recorded in reorganization items.

Regular full-time ("RFT") employee notifications resulting in the charge for Nortel's post petition cost reduction plan is as follows:


	Employees (approximate)
	Direct ^(a)		Indirect ^(b)		Total
RFT employee notifications by period:
During 2010		168		1,113		1,281
During 2011		107		368		475
Total RFT employee notifications		275		1,481		1,756

(a)	Direct employees include employees performing manufacturing, assembly, test and inspection activities associated with the production of Nortel's products.

(b)	Indirect employees include employees performing management, sales, marketing, research and development and administrative activities.

Other Cost Reduction Activities

During the year ended December 31, 2011, there were no charges related to Nortel's real estate cost reduction activities. During the year ended December 31, 2010, Nortel's real estate related cost reduction activities resulted in charges of $8, which were recorded as part of SG&A and reorganization items. During the year ended December 31, 2010, Nortel recorded an impairment of $11, as part of SG&A and reorganization items and additional charges of $13, to reorganization items for lease repudiations and other contract settlements.

As of December 31, 2011, Nortel's real estate and other cost reduction balances were approximately $6, which are classified as subject to compromise. As of December 31, 2010, Nortel's real estate and other cost reduction balances were approximately $5, which are classified as subject to compromise.