A Giant of Journalism Faces Its Most Critical Deadline

In popular imagery, this is the American newspaper.

It’s the one with those wild headlines like “Ford to City: ‘Drop Dead,’ ” with reporters who still do cover the waterfront, and featuring columnists with heavy fists and big bleeding hearts. From its great Art Deco headquarters on East 42nd Street, this, for all intents, is the paper where Superman worked.

It is also still the biggest metropolitan newspaper in America, with 1.2 million circulation.

And on Friday, when its 10 labor contracts expire, the New York Daily News will enter a fight most experts believe will either fatally break the backs of its employee unions or prompt owners to shut the paper down--the biggest newspaper ever to die in American history.

In 1981, Tribune Co. of Chicago, which owns the Daily News, tried to give the paper away--it even offered to pay media magnate Joseph Albritton $100 million to take it--but the deal failed. In the eight years since, Tribune has endeavored to cut costs and stem sliding circulation and advertising. In 1984, it hired one of the most celebrated newspaper brawlers in the country, Jim Hoge, to be publisher, and it has even turned a modest profit some years while taking in about $450 million in annual revenue.

But to make the paper more than a sentimental object on its balance sheet--particularly amid rumors that Tribune Co. might be vulnerable to a takeover--management has decided it must have a final solution to what Wall Street analysts politely call “the Daily News situation.”

So a year ago, Tribune Co., which had just broken its printing unions in Chicago, started preparing to win everything in the contract talks now under way with the paper’s 10 unions in hotel meeting rooms around New York.

It hired the most notorious anti-union law firm in the media business to handle the negotiations and supervise strategy. It now patrols its printing plant with uniformed guards and German shepherd dogs. It secretly trained its managers in Florida to operate presses and make printing plates. It set up a secret strike newsroom in an old Sears warehouse in North Bergen, N.J. And, it now says, it is ready to produce and deliver the paper during a strike--a feat never before accomplished in New York.

But the strike, which experience suggests will be violent, now may be inevitable, many newspaper officials believe. And Tribune Co. has bet the life of the Daily News that the company can survive it.

“I think there is a real likelihood or possibility that (Tribune Co.) will not stay with the News if they can’t get (massive union concessions) or if there is a strike,” said J. Kendrick Noble Jr., who analyzes media companies for the New York brokerage firm of Paine Webber.

Hoge, the Daily News publisher, has not granted interviews in months but he did agree to one for this article. He summarized the situation this way: In the last two decades, “both sides (labor and management) have shown an awesome lack of imagination” about how to solve the Daily News’ problems. The result is that “now we are at a point where it really has to be done, and it has to be done all at once.”

More than the Daily News’ future is at stake too.

If the unions strike, some think they may no longer have the clout to shut the paper down. That would be a humiliatingly visible failure for American labor in a once-mighty union town. If a strike succeeds, the unions may take the blame for killing the Daily News.

And paradoxically, if the unions give in and the Daily News flourishes, the paper could become a persuasive argument that newspapers can make money appealing to working class and immigrant readers, those people whom newspapers and their advertisers largely abandoned years ago to television.

The reasons for the Daily News’ predicament are complex but say much about the newspaper business.

This is a working-class newspaper, the paper of the city’s Irish Catholics, the king of American tabloids, with sensational headlines that amount to a gritty art form. When gangster Carmine Galante was shot to death in an outdoor restaurant, the Daily News read: “Galante Dies Alfresco in Brklyn.”

The problem is that in the 1970s, many advertisers stopped seeing newspapers as a way to reach the working class. They could reach more of them more easily on television. So the New York Times, with smaller circulation, found itself far more profitable than the Daily News, because its readers were more affluent. This is one reason too why the city, which once had 11 newspapers, today has only four.

Another problem is that the Daily News’ traditional audience of Irish and Italian Catholics has moved to the suburbs, replaced by minorities and non-European immigrants. At its peak in 1947, Daily News circulation exceeded 2.35 million, nearly double what it is today.

In addition, until recently, many doubted the quality of News management. The News’ 40-year-old presses, for instance, are the most antiquated and inefficient of any major paper in America. And the last great attempt to revive the News in 1980 proved especially ill-conceived. It was an evening tabloid designed for upscale readers, an idea that was contrary to every current in the newspaper business, and it caused the rival New York Post to start challenging the Daily News in the morning.

Then there are the labor contracts. Since Hoge arrived in 1984, he has installed a new generation of managers, and his editors contend that the product is much improved, though many outsiders are still skeptical. The union work force has been cut by 1,000 jobs to 3,000, and the unions have given back about $30 million in contract concessions. Tribune Co., in turn, has invested $170 million over the past decade in the News and last year spent about another $50 million for two sites, in Long Island and New Jersey, where the News could build new printing plants.

But the company was unwilling to spend the really heavy money needed to save the News--$300 million to $500 million in presses and plants--until Hoge could prove that the paper was viable. That meant major concessions, especially since Tribune Co. wants News profits to pay for those presses in eight to 10 years.

Then, in January, 1989, two events coincided. Charles Brumback ascended to the chief executive’s post at Tribune Co. And there was a blowup at a meeting between Hoge and the unions, during which Hoge’s pessimistic economic forecast was greeted with shouts from union leaders that they would make no more concessions.

Almost immediately, Hoge said he and Brumback decided to take a “tougher posture.” In effect, they decided to force the unions to relinquish control over labor contracts--and break the unions if they had to. It was the big play--and it was risking the Daily News in the process.

At the heart of its strategy, management developed what Hoge describes as the most complete and serious plan to publish during a newspaper strike in New York history. It hired paramilitary guards at the printing sites, set up the strike newsroom and took non-union employees down to Florida last year, set them up in a beach resort and trained them as platemakers and press operators. “We were being brainwashed,” said one young editor who recalled that his Florida suite was bigger than his Manhattan apartment. “And it worked.”

The tactics are deliberately provocative. But management claims that it has no choice. It contends that built-in “abuses” in the News contracts cost the paper $50 million to $70 million annually. According to Hoge, the News has 700 employees that it doesn’t need.

John T. Sloan, the News’ 38-year-old vice president for human resources, offers this list of indictments against the unions:

* That one contract requires delivery trucks to go out only half full.

* That 14 people on average are paid to work every press, when management says only seven are needed.

* That the union, not management, controls hiring.

* That the union, not management, controls how workers are deployed.

* That a “buddy system” operates by which some people are signed in by friends and never come to work.

* That some drivers make more than $100,000 a year with overtime.

* That, overall, the News pays 50% of revenues for wages and benefits, compared to closer to 30% for other major papers. (Overtime accounts for 13% of payroll, compared to 3% at other major papers.)

Sorting through the list is difficult. Sloan, for instance, refuses reporters’ requests to see the printing plant.

Some of the union’s points are just as hard to verify as Sloan’s. For instance, Jack Kennedy, president of the New York Printing Pressmen’s Union local, insists that the “buddy system” ended years ago, but even employees sympathetic to the unions said they have their doubts.

Kennedy also contends that more people are needed to run the Daily News presses because they are so old and noisy that a worker can’t stay at them for even an hour straight.

Still, the most important issue at this point may be good faith.

George McDonald, president of the Allied Printing Trades Council, said the unions already have made concessions over the past eight years. What they want now, McDonald said, is a commitment from the News that it will invest in new plants. It takes years to order and take delivery on new presses. The fact that the News hasn’t ordered them yet, he said, suggests that Tribune Co. doesn’t want to run the News anymore.

“They either want to provoke a strike so they can kill the paper or they want to get everything they can out of the 10 unions and then sell,” Kennedy said.

Hoge said that is dead wrong. He contended that he just wants to get “the real tools of management” back in management hands.

“We don’t hire,” he said. “We don’t determine how many jobs there are. We don’t determine overtime, a great deal of which is actually written into the contracts. “We don’t supervise,” since the foremen are union members. “As a result, we have lousy service we can’t improve and excess costs we can’t get rid of.”

So does the Tribune want to run the News?

Analyst Noble said the Tribune management has a public goal of a 20% pretax profit margin. But even if the News cut all of the purported $50-million to $70-million worth of abuses out of the labor contract, that would equal a profit margin of something closer to 10%.

Other analysts estimate that it would cost the Tribune Co. about $100 million in severence payments to shut down the News--and perhaps less if the paper is closed during a strike, when the company could argue that workers had repudiated their severence benefits. Tribune Co.’s share in the partnership that owns the Daily News building could be worth $40 million to $60 million if the paper were closed and the building sold.

So from a financial point of view, analysts agree that the Tribune Co. benefits as much, and perhaps more, from shutting down the paper as from any other course. A shutdown meets the Tribune’s goal of finally resolving things.

But most believe that Hoge, who once battled Tribune Co. as publisher of the rival Chicago Sun-Times, has now staked his career on saving the Daily News. And his path to the top of Tribune Co. and his reputation in the industry is probably better served by saving the paper than killing it.

One insider said the biggest obstacle to a settlement is that both sides have “blood in their mouths.”

If so, one of the most provocative acts was hiring the Nashville, Tenn., law firm of King & Ballow. Bob Ballow was the negotiator Brumback used when he was publisher of the Chicago Tribune to effectively break his pressman in Chicago.

Ballow is a silky Southerner who started working at age 11 and went to the YMCA Night Law School in Nashville in middle age. He refuses to talk to reporters now, but in the past has expressed a deep antipathy for organized labor.

Unions, he told the National Law Journal, represent only 17% of the work force, about the same percentage as is “susceptible to television evangelism.”

And unions are utterly unnecessary. “A union cannot provide you with any rights under the law that you don’t already have. . . . The education of working people usually eliminates the need for unions.”

Reporters at the Daily News initially said they were sympathetic to some of management’s complaints about abuses by pressmen and drivers, and they were told by management that the company had no real problem with the reporters’ contract.

But when the talks began last month, Newspaper Guild local President Barry Lipton said Ballow delivered a 60-plus-page contract proposal that effectively threw out everything the guild had earned over the years. And in negotiations, reporter and negotiator Don Singleton said, Ballow tried to sound ominous. “He would say things like, ‘I feel sorry for you guys.’ ”

Now, some News reporters once sympathetic to management say they no longer are. “I now doubt anything they say,” said one highly regarded reporter.

Last week, sources involved in the negotiations said, management suddenly offered the electricians 15% wage increases over three years and 18% to the machinists--in exchange for large benefit concessions. And other sources said the guild, which includes the reporting staff, was offered a three-year contract Monday that management called a 30% raise, in exchange partly for giving up the guild’s liberal sick leave policy. The union said there are still problems with the take-it-or-leave-it offer.

In any case, few expect the pressmens and drivers unions to see contracts they will like. For one thing, their present contracts are too lucrative. For another, any contract has to be voted on throughout the union, which includes pressmen and drivers at the New York Times unlikely to vote for concessions that they know the Times would soon want to match.

The Times is not the only paper interested. If the News succumbs, that would open the door for Newsday, the suburban paper from Long Island, which has launched an expensive New York edition that is still losing millions a year. Newsday is owned by Times Mirror Co., which also owns the Los Angeles Times and other media properties.

Theodore W. Kheel, who has mediated most of the newspaper strikes in New York since the 1950s, now is acting as an unpaid adviser to labor. “The unions’ position is very difficult,” he said sadly. “Tribune Co. is in a very good position, and that is why they are acting the way they are.”