Sam Zell: More Layoffs Ahead
By Margaret Lyons in News on Feb 13, 2008 4:44PM
Tribune Company chairman and CEO Sam Zell had some bad news for employees this morning. He sent out a memo saying the months ahead would include "a combination of voluntary separation programs, involuntary layoffs, attrition and closing of open positions."
Scott C. Smith, president of Tribune publishing, sent out a follow-up with, well, more bad news: approximately 100 positions will be cut from the Chicago Tribune Media Group.
Zell's and Smith's full memos after the jump...
From: Talk to Sam
Sent: Wednesday, February 13, 2008 10:17 AM
Subject: Reducing staff
As I have said repeatedly while on the employee road show, we will not achieve success by just cutting costs. Ultimately, our battle will be won by growing revenue, and by making Tribune Company a fierce competitor across all media channels – print, broadcast and interactive.
I have also shared the reality of our significant debt levels and financial covenant obligations. These obligations require us to be more disciplined than ever with respect to managing our costs and maximizing the productivity of our assets and people. We need to constantly think and act like owners, and relentlessly strive to optimize the effectiveness of our businesses.
In my recent email about the ESOP, I outlined the assumptions we made in developing our projections for Tribune's financial performance going forward:
§ Cash flow in line with that of 2007
§ Newspaper revenues continuing to decline
§ Broadcast and interactive revenues increasing.
While results so far in broadcasting and interactive are promising, we have not had time yet to realize these gains. Further, a weak economy and significant declines in advertising volume at our newspapers are putting downward pressure on our cash flow. These factors are forcing us to take immediate action, and are the basis for the sense of urgency you've heard me talk about so often.
It is within this context that I am announcing we must reduce the number of staff positions within the publishing group and corporate office through a combination of voluntary separation programs, involuntary layoffs, attrition and closing of open positions. Each of our newspapers is making its own decision about which programs best suit its needs.
Most of the affected positions are in support service areas, such as finance, HR and technology. We are creating a flatter organizational structure, eliminating layers of personnel that inadvertently created bureaucracy. The result will be a streamlined culture that accelerates our decision making, and enables us to act quickly.
I have discussed with many of you our mutual concern about the cyclical eroding of content quality to meet budgets manufactured in the corporate office. I promise you, in time, we will end that downward spiral. Right now, across the company, we're going through a zero-based budgeting process designed to let each business unit develop and be responsible for its own budget. This will make our financial planning and goals more realistic, allowing us to prioritize the work ahead and then staff accordingly.
Down the line we will likely be adding staff where there are opportunities for revenue growth. At the moment, we are still assessing the priorities and needs of our interactive and broadcasting groups.
Unfortunately, I can't turn this ship from its course of the past 10 years within just a few months. Further, while I will do everything in my power to drive, pull and drag this company forward, I can't promise we won't see additional position eliminations in the future, if we continue at our current rate of cash flow decline.
But, make no mistake. This is not my ultimate strategy for our company. I believe we can achieve greatness. I have staked my reputation on it.
And from Smith:
From: Smith, Scott C.
Sent: Wednesday, February 13, 2008 10:37 AM
Subject: Financial Performance, Staff Reductions and Growth Initiatives
Even with all the aggressive actions we have taken to improve our results, revenue trends continue to worsen due to the difficult economic conditions. Total revenue for Chicago Tribune Media Group was down 5% in period 1. Ad revenue was down double digits, a continuation of the trend late last year. First period operating cash flow was also down substantially more than the 8% decline for 2007. The near term outlook shows few signs of improvement.
To deliver the best possible 2008 financial performance and position us for growth when the economy improves, we need to further reduce operating expenses. As covered in a note today from Sam Zell, actions to improve cash flow trends, including staff reductions, will be taken across the publishing group and in the corporate office.
Staff reductions of approximately 100 positions across Chicago Tribune Media Group will be necessary, about 3.5% of total current employees. We will accomplish these reductions by March 31 through a combination of voluntary and involuntary separation programs. Organization changes will occur in many areas based on our customer, growth and efficiency priorities.
Severance for both the voluntary and involuntary programs will be based on one week pay per six months of service with a minimum of six weeks pay. These benefits will be provided through the company's cash balance plan, our overfunded retirement plan that will also provide eligible employees the 2% contribution described yesterday and the 3% annual contribution going forward. There will be a range of payout options from a lump sum to annuity payments. These options are described in the employee Q & A guide at ctc.trb/ESP2008 that will be posted by tomorrow morning. Beginning in January 2009, the company expects to reduce severance benefits from our current practice.
Eligibility for the voluntary program will require 10 years of service. Many positions we cannot do without are also not eligible. Eligibility guidelines will also be posted at ctc.trb/ESP2008 by Monday, February 18. As with our program last year, we anticipate not all volunteers will be accepted based on business needs.
We will defer implementing any merit increases due between now and March 31 while we work through these organizational changes. Merit increases for our ongoing employee group will then be made retroactive to the review dates based on responsibilities and performance. Our goal is to achieve appropriate market and merit based pay for everyone committed to our future.
We will also continue to act aggressively on all our initiatives to grow revenue and market share in each of our businesses.
Thanks to everyone for your dedication through this difficult period. Our actions will create the best possible future for all we serve.
Best regards, Scott