After three days of closed door meetings — so closed that the principals had to sign confidentiality agreements —Star Tribune management and labor just issued a joint statement about the discussions.
Labor is, of course, a major expense. (And, we should note, a major asset.) Strib Newspaper Guild co-chair Graydon Royce said layoffs weren’t mentioned in what he described as “introductory” sessions. But don’t be too reassured, Strib workers: Specific cuts didn’t come up at all. Still, I’m told management is looking for substantial expense cuts throughout the company by early summer.
What is different about the current skein of meetings is that it’s not classic bargaining: The Strib imported Restructuring Associates Inc. as a mediator to find a common way forward before the union’s contract expires this summer. Formal bargaining will commence at some point. Next week, union leadership will meet with Strib employees to assess whether they should participate in this pre-bargaining or go right to the mattresses.
As reported here previously, the cash the Strib takes in from operations is diving below its debt payments. That could put owners Harte and Avista Capital Partners in violation of their agreements with lenders,a problem PiPress owners MediaNews Group is having. Harte and Avista Capital Partners would have to dig into their own pockets (unlikely, given the Strib’s declining asset value) or sell (tough, since like many homes, the Strib may be worth less than its mortgage). Most newspaper experts I talk to say you can’t cost-cut your way out of huge debt — the nut is too big and brand damage high — but it doesn’t mean management can’t try.
Star Tribune Union Leaders and Management Hold 3-Day Business Education Session March 21, 2008 — For the past three days Star Tribune management and union leaders met to discuss the serious financial issues facing the company and the newspaper industry.
Publisher Chris Harte opened the business education meetings by telling attendees that the Star Tribune’s current financial difficulties result from a precipitous drop in revenue while expenses have remained virtually flat.
Harte and six Star Tribune senior managers gave presentations outlining the company’s current market and financial position. Additionally two outside industry experts gave presentations on the state of the industry.
Dan Sullivan, professor of media management and economics at the University of Minnesota School of Journalism, and John Lariccia, a partner at Bain Consulting, said that some of the problems facing the national industry and the Star Tribune are systemic — declining readership and the proliferation of media outlets on the Internet that compete for audience and advertising. Others are cyclical, such as the current economic downturn.
In addition to Harte, Star Tribune speakers included Dan Shorter, president of digital media, Dave Montgomery, chief financial officer, and senior vice presidents David Walsh, advertising; Steve Alexander; circulation; Nancy Barnes, news; and Kevin Desmond, operations.
All the speakers agreed that the Star Tribune is at a crossroads, and they stressed that the company’s brand strength and market leadership are keys to future growth. Harte emphasized that expenses will have to be cut to get through the immediate financial challenges.
— Comparisons relative to other newspaper companies. The Star Tribune compares favorably in terms of reach and market position but unfavorably in terms of production costs.
— The financial obligations of the company, including debt.
— The commitment to future growth. While the immediate challenge is to reduce expenses, the long-term viability of the company depends on growth.
In the next few days the unions will meet as a council or among their memberships to determine whether they will continue to participate in a joint problem-solving process to address issues raised in the sessions.