By Rick Edmonds
The crystal ball thing is not a favorite of
mine. But with the Boston Newspaper Guild's narrow rejection of an 8
percent pay cut and other contract concessions at The Boston Globe, I'll make an exception. Here are my best guesses on what's next.
Expect a quick meeting between management and Guild, then imposition of the 23 percent wage cut
(which was management's "final offer"). This threat was explicit;
management loses credibility now and in future negotiations unless it
follows through. I don't know Globe
Publisher Steven Ainsley well, but I agree with others who do that he
is a hardball kind of guy. My hunch is that he is taking the lead in
the negotiations in consultation with parent New York Times Co. execs,
rather than vice versa.
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The Globe is not "on track to lose $85 million," at least not on a cash basis. In fact, the paper may be getting close to break-even.
Times Co. spokeswoman Catherine Mathis conceded in a phone interview
Friday that the $85 million "operating loss" that management has used
for bargaining includes depreciation, amortization and special charges.
She declined to say just how much better the paper is performing on a
cash flow or EBITDA (earnings before interest, taxes, depreciation and
amortization) basis.
The New York Times Co.'s first quarter financials show a company-wide depreciation and amortization charge of $35.2 million. The Globe
is roughly one-sixth of the company, so figure it for roughly $6
million D&A for the quarter, or $24 million for the year. Keep in
mind these are losses only on paper, not cash going out the door. The
first quarter report also includes a special charge of $25.2 million
for severance, mostly in the New England group (the Globe and its sister Telegram & Gazette
in Worcester, Mass.). The company will pay that money out, not
necessarily all in 2009, and thus will realize substantial payroll
savings going forward. It seems odd, to say the least, to count that
severance as a loss in the context of negotiating pay cuts and layoffs.
The savings from concessions by the Guild and other unions are targeted at $20 million. With that, the Globe would be close to break-even for 2009.
A
"no" vote and continuing labor turmoil make the paper nearly impossible
to sell. But a sale does not look like a realistic possibility for the
Times Co. anyhow -- at least in the short term. Globe
labor reporter Rob Gavin and I discussed sale prospects today. We
agreed that few papers have found any interested buyers this year and
that the going rate in the few completed transactions seems to be a
fair price for real estate and other assets, but nothing more.
So unless there is a mystery buyer in the wings who is willing to pay a premium, the Times Co. does not stand to lose anything significant by continuing to operate the Globe. The indicated strategy for the Globe
-- as for the parent company, as for the industry -- is to weather the
worst of the downturn, hope for a post-recession bounce in advertising
and develop new revenue streams.
Best case, the Globe
could be more attractive to a community-minded buyer a year from now.
Worst case, with mounting losses it could be a candidate for closure.
But waiting and seeing is not necessarily punishing even if the Guild files a complaint with the National Labor Relations Board over the 23 percent pay cut and gets a protracted hearing.
Mathis
reiterated to me last week, as she has told other reporters, that a
shutdown remains a possibility and that the company has no inclination
to start over on the Guild negotiation. If the troubles escalate (a
strike, say, though that has not been threatened) to the point that The New York Times newspaper is threatened, I think the shutdown scenario is plausible.
That
said, given Times Chairman Arthur Sulzberger Jr.'s oft-repeated
commitment to quality journalism, I think he dearly wishes to avoid
being the first one this century to shutter one of America's great
metros.
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