In a move the United Media Guild has long feared, Lee Enterprises announced it would move the design and copy-editing work at the St. Louis Post-Dispatch to its design/editing hub in Munster, Ind.
Post-Dispatch management had long resisted the industry-wide trend toward production consolidation. Lee long ago outsourced the design and editing functions of its other newspapers, mirroring the consolidation to design/editing hubs that occurred in Gannett, GateHouse and other chains.
“Such outsourcing inevitably weakens the newspaper, since editors with little knowledge of the St. Louis region will be editing copy, writing headlines and designing pages of the Post-Dispatch,” UMG president Jeff Gordon said. “But our remaining members will do their best to maintain the P-D’s high journalistic standards and keep serving the community.”
The Post-Dispatch was among the last chain-owned newspapers of its size to retain its design and editing jobs. But that fact offers no consolation to the eight Guild members who now face a lay-off due to this decision.
This outsourcing comes at a time when the Post-Dispatch is already offering buyouts to both Guild-represented and exempt employees. These cutbacks came on the heels of Lee’s sale of the Post-Dispatch building and its agreement to move its operation to a nearby building owned by its new landlord.
Why all the slashing?
The Post-Dispatch remains profitable. But its revenues continue declining, as they are across the industry. Lee wants to maximize its cash flow so it can continue paying down its onerous debt at an accelerated rate and refinance it at better terms.
But another challenge has emerged: Dissident shareholder Carlo Cannell has been highly critical of Lee’s management while urging a makeover of the company’s board of directors. His effort could draw the interest of vulture capitalist firms like Alden Global Capital, which is buying up and stripping down newspapers across the country.
Cannell’s initiative has prompted Lee to find more money to defend this attack at the shareholder level. That has also given Lee motivation to run an even leaner operation, since potential bidders like Digital First (backed by Alden) and GateHouse (backed by Fortress Investment Group) target companies they believe they could squeeze more money from.
Lee’s rationale: If there is nothing left to squeeze, maybe the vulture capitalists will leave us alone. But in the meantime, its newspapers suffer.