THE NEWS IS BAD … AND THE PROFITS ARE OUTSTANDING

GOLD AMID THE GLOOM

By JIM HEANEY

It happens every time the Guild negotiates a contract.

Company negotiators at some point during bargaining trot out a set of numbers that purport to show how overpaid we employees are. The dubious methodology employed always brings to mind the cliché “lies, damned lies and statistics.”

Management didn't waste any time this negotiations, offering its spin the very first day of contract talks, along with the usual doom and gloom scenario presented every March during its “State of The News” meetings with staff.

What News management didn't talk about - and never talks about - is the company's continued profitability. For all the hand-wringing, penny-pinching and job-freezing of the past year, you would have thought the bottom had fallen out.

Management reported that last year's pre-tax profits are projected at $46 million, not that far off last year's $50 million.

The rate of return dropped by from 34 to 30 percent, which is to say Warren Buffett and his fellow shareholders are pocketing 30 cents of every dollar they take in - and exporting the money straight out of town. This is an extraordinary rate when you consider the typical American business had a pre-tax rate of return of 8 percent and that even newspapers, with notoriously high profit margins, usually don't approach the kind of margins The News posts year after year.

Hell, Jay Harris quit as publisher of the San Jose Mercury News in protest of attempts by Knight Ridder to cut spending in order to reach a profit margin substantially lower than The News'.

Wages in any business are typically tied to a couple of factors, including company profitability and worker productivity. In both cases, The News is hard pressed to complain. It continues to post huge profits, and its work force is producing as never before, as an-ever-shrinking staff is asked to do more, not less.

If the company were to crunch the numbers it might find out that dollars of profit per employee has increased in recent years.

All of this isn't to dismiss management's legitimate concerns about financial trends. Circulation is down, ad dollars are tougher to come by and the regional economy continues to languish. Competition for revenue dollars and reader attention has never been stiffer. The World Wide Web continues to pose a challenge to the media's established order, even though it has yet to produce the kind of profits of established media businesses like newspapers.

Clearly, change is in order. But the company's response to today's challenges has been largely to pinch pennies. What other business would, in the face of declining sales, decide to give its customers less and charge them more? That's just what The News is doing. Readers get less news and a higher subscription price. Advertisers pay higher rates for a shrinking circulation.

Consider what we're publishing every day. Our news hole - the amount of news in the paper - is shrinking. The newsroom staff has been shrunk, making it more difficult to produce quality journalism. Management frets about the lack of younger readers while clinging to its insistence that journalists not be involved in the online edition of the paper - the media of choice for a growing number of younger readers.

And the problems aren't restricted to the newsroom. In classified advertising, management’s response to declining sales is to monitor how many times employees go to the bathroom and other such foolishness. Technology is changing many aspects of the operation, but funding for training programs has all but dried up in many departments.

The point is this: this newspaper faces real economic challenges. And for we employees to prosper, the company needs to maintain a healthy profit margin. But the key to The News' continued financial success is smart decision making that recognizes that a higher quality product is the key to continued success, and that its employees are the key to making that happen.

Long-term financial success doesn't rest with arm wrestling health insurance benefits away from employees or finding other ways to save a nickel here and a dime there. Such a strategy is penny-wise and pound foolish, as it undermines the paper's greatest asset, its people.

These contract talks will evolve around economics. Keep this in mind:

·Our wages, given the paper's circulation and profitability, are average - at best - and lost ground to inflation over the course of the current contract. And an argument can be made that they are sub par in several departments.

·Health insurance benefits are good, but the equation is not one-sided, as we've made concessions over the past decade and the company has benefited from some of the lowest premiums in the country.

·Pension benefits are undeniably sub par. It's not just the matter of the $30,000 cap. Retirees walk away with a relatively small portion of their salary and benefits are not indexed. And because investments used to fund the pension plan have done so well, there is sufficient money to improve benefits without requiring additional money from The News.

Are we over-compensated, as management suggests? Hardly.

Shareholders? Now, that's a different story.

The Guild's bargaining team offered no comment to management after its dog-and-pony show the first day of bargaining. We don't want to waste on time dealing with false arguments, and we hope in the coming months that talks result in a contract that recognizes the value of the paper's employees and the vital role they play in the paper's continued profitability.