Times Parent to Take Cost-Cutting Steps

Faced with a 37% decline in profit through the first nine months of 2001, Chicago-based Tribune Co.--publisher of The Times and 10 other daily newspapers--announced a new series of cost-cutting moves Wednesday, including a yearlong wage freeze for all 18,000 nonunion employees.

Tribune, which also owns 22 major-market television stations, said the wage freeze will be effective Jan. 1.

In an e-mail to employees, John Madigan, chief executive and chairman of Tribune, said he and about 140 senior managers would take a 5% reduction in salary next year, and the company’s top six executives will not receive bonuses for 2001.

Madigan said cash bonuses to other executives will be minimal this year. The pay freeze will affect about 4,000 Times employees. The 5% pay cut will affect 10 senior Times executives, including Publisher John Puerner and Editor John Carroll.

The nation’s economy has been in a downturn this year, triggering a severe decline in advertising revenue, Madigan said. “The Sept. 11 terrorist attacks in New York and Washington only made a bad situation even worse.”

After restructuring charges in the third quarter, Tribune had its first quarterly loss in 10 years.

The high cost of covering the war in Afghanistan is likely to create further financial pressures on newspapers and television stations.

Industrywide, newspaper advertising revenue during the first six months of this year was down 6.5% from the same period last year.

Through Oct. 28, Tribune newspaper ad revenue was down 7%. For the same period, advertising revenue at the New York Times declined 13.8%.

Tribune broadcast and entertainment revenue was down 6% for the same period.

These declines, and the resultant drop in profits, have led most media companies to reduce costs. Media analyst John Morton said Tribune’s pay freeze is “certainly better than laying off 200 people.”

Morton said the executive pay cuts are “more symbolic than anything else. It shows they want to share some of the pain; but if you’re making $400,000 or $500,000 a year, you can afford to take a 10% pay cut.”

In Madigan’s case, based on his 2000 salary of $846,311, the 5% pay cut would cost him $42,316. His bonus in 2000 was $3 million. (Salaries for 2001 will not be made public until April.)

In Wednesday’s announcement, Madigan said all Tribune employees except the top six corporate executives and the approximately 4,000 employees covered by collective bargaining agreements will be eligible for special one-time merit-based grants of Tribune stock options.

Tribune stock closed at $35.88 on the New York Stock Exchange, up 55 cents but still well below its 52-week high of $45.90.

After the market closed, Fitch Inc. lowered Tribune’s credit rating from stable to negative, citing the “deterioration in credit protection measures” resulting from recessionary conditions in its newspaper and TV markets.