Thursday, April 23, 2009

Tribune Wants To Pay $13 Million In Bonuses As Layoffs Continue

Excerpted from Bloomberg News, Chicago Sun Times,
Associated Press

Tribune Co., the newspaper company taken private by real-estate billionaire Sam Zell, asked a bankruptcy judge to approve $13.3 million in bonuses for 693 managers.

(This comes at a time when Tribune has been offering zero percent (0%) raises to union members in collective bargaining and having had a series of massive layoffs, has said to expect more staff cuts. BD)

Tribune Cuts News Staff By 53 in Restructuring

Meanwhile, newsroom employees at the media giant’s flagship had their own morale issues as managers conducted the biggest one-day purge since real estate entrepreneur Sam Zell took over the company.

The exit of 53 editorial employees is part of a paper-wide cost-cutting effort. Tribune Editor Gerould Kern said in a letter to staff that cuts are part of a newsroom reorganization that “will focus us more clearly on our core mission” going forward with a newsgathering team of around 430. This 11% staff layoff announcement was made at the same time as the company asked the court for permission to pay out $ 13 million in executive bonuses.

“With today’s actions, we are making the leap to a newsroom structure that we believe is sustainable barring further significant declines in advertising revenue,” Kern wrote.

These reductions are just the latest at the Chicago Tribune, which was said to have around 670 newsroom positions 3½ years ago. That’s about the time the newspaper industry’s revenue peaked according to statistics from the Newspaper Association of America.

Kern and Chicago Tribune Media Group President, Publisher and Chief Executive Tony Hunter said in an interview last week that the paper’s advertising revenue is off more than 20 percent so far in 2009 and they were operating on the assumption that would not change this year.

The top 10 executives of the Chicago-based publisher are excluded from the proposal, according to papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware.

The company also is seeking permission to pay $2.5 million to 70 employees fired last year before Tribune filed bankruptcy.

"These payments are vitally necessary to reward participants for their extraordinary contributions during an exceptionally difficult year," the company told U.S. Bankruptcy Judge Kevin Carey in court papers.

The average bonus would be $18,273, which the company noted is down sharply from prior years. In its filing, it said 16 percent would get more than $30,000.

Relying on findings from compensation consultant Mercer (U.S.) Inc., Tribune said that even with the awards, the executives would be paid 41 percent less than their market competitors. Not addressing the disparity “would have a significant adverse impact on employee performance and morale,” it told the bankruptcy court.

Tribune, the owner of the Los Angeles Times, the Chicago Tribune and the Chicago Cubs baseball team, filed for bankruptcy in December, blaming high debt load and a drop in advertising.

Under bankruptcy court rules, companies can request permission from a judge to reward mangers for reorganizing a company.

70 Percent Reduction

In a note to company employees, Tribune Chief Operating Officer Randy Michaels and Executive Vice President Gerald Spector said the bonuses will be as much as 70 percent less than in previous years.

Robert Paul, a lawyer representing the Washington Baltimore Newspaper Guild's members at the Tribune's Baltimore Sun, didn't immediately return a voice-mail message seeking comment yesterday. A call to the Graphic Communications Conference union offices wasn't immediately returned.

Tribune employs about 14,600 people, mostly at its eight newspapers and 23 television stations.

While the over all industry outlook continues to be bleak, according to the motion requesting approval for the 13 million in bonus payments, Tribune Co.'s publishing division generated $461 million in operating cash flow last year, a profit margin of 16.7 percent "during one of the worst years in newspaper advertising history."

Twenty-one of its 23 television stations gained market share in 2008, as did WGN-AM 720.

The company implemented strategic initiatives that are expected to generate about $425 million in incremental annualized cash flow.

The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington)

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