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PHILADELPHIA (AFX) - The new publisher of The Philadelphia Inquirer and the Philadelphia Daily News told employees Friday that layoffs are "unavoidable" because advertising revenue is down and the owners need to cut costs to meet their bank obligations.
"We must reduce our work force so that it is in line with our reduced revenue," wrote Brian P. Tierney, chairman and chief executive of Philadelphia Media Holdings LLC. "To the extent we don't get the savings, those layoffs will be larger."
Philadelphia Media Holdings -- an investment group made up of Tierney, luxury homebuilder co-founder Bruce Toll and other local investors -- bought the two dailies, their Web site and sister properties from McClatchy Co. in June in a deal valued at $562 million.
Tierney expressed optimism after the sale was announced, saying he wanted to invest in the newspapers to ensure their continued growth.
But in his letter, he said the investors needed to make changes. Citing negotiations with the newspapers' unions, he said the company needs to restructure labor contracts and the work force.
"We need to reach agreements that allow us to achieve the savings to meet our loan obligations, and to reinvest in and to grow our business," he wrote.
Cash flow dropped from $100 million in 2004 to $76 million last year and is estimated to be less than $50 million for 2006, Tierney said.
Jay Devine, a spokesman for Philadelphia Media Holdings, said the financial picture has changed dramatically in the last few months. Investors initially had thought they needed to save $20 million a year going forward, but now they believe they will have to save more, he said.
"We also were optimistic about the end-of-the year quarter," Devine said of the group's initial hopes. "That, too, now looks very grim."
The company does not have a time frame for deciding how many layoffs there will be, but needs to get its current labor contracts resolved, Devine said. It currently has tentative agreements with four of its 12 labor unions, he said; all the current contracts expire Oct. 31.
"The sooner we can get the labor agreements done, the better the financial picture looks," Devine said.
As of last month, the company had a total of 2,461 employees. Through buyouts last year, the Inquirer reduced its editorial staff by about 15 percent, from 500 to 425, and the Daily News cut its editorial staff 19 percent, from 130 to 105.
Henry Holcomb, president of the Newspaper Guild of Greater Philadelphia, did not immediately return a telephone message Friday afternoon.
In March, McClatchy announced plans to buy Knight Ridder Inc.'s 32 papers and sell 12, including both Philadelphia papers, largely because they were not located in rapidly growing markets.
The San Jose Mercury News, owned by MediaNews Group Inc., said Friday that it plans to lay off as many as 101 employees, including 41 newsroom positions, by Dec. 19 to cut costs and make up for declining advertising revenue. Copyright 2006 Associated Press. All rights reserved. This material may not be
Copyright 2006 AFX News Limited. All Rights Reserved.
