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N&O to cut 70 jobs; parent chain McClatchy slashes workforce 10%

Posted June 16, 2008
Updated June 17, 2008

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— McClatchy Co., which owns The News & Observer in Raleigh, is cutting 10 percent of its work force in a move to save $70 million a year. Those cuts will be felt at North Carolina’s two largest newspapers –The N&O and the Charlotte Observer.

The layoffs include 70 positions, or about 8 percent of the workforce, at The N&O, Publisher Orage Quarles said in a statement e-mail to employees.

“This is a painful but necessary step,” Quarles said in a statement. “We're operating in a time of great change and challenge for our operations, for The McClatchy Company and for the newspaper industry overall. Increased competition and a pronounced economic downturn have combined to reduce revenues dramatically, and these cuts are part of the way we must respond. As you know, we have already been transitioning to new ways of doing business, and we are now accelerating that effort. We are confident in our ability to navigate to a stable and prosperous future as an integrated media company serving as our community's most trusted supplier of news and advertising information.”

Layoffs will be made in news, production, circulation, advertising, information services and marketing, Quarles added.

Other changes are being made to cut costs, but Quarles declined to discuss details. “I can’t do that because I haven’t shared all of them with my employees yet,” he said in an interview with WRAL.com.

Later in another brief phone call, Quarles declined to discuss the announced changes. "You will have to read it in tomorrow's paper," he said.

However, the Observer reported: "The papers are combining capital bureaus, sports and research departments in an effort to eliminate overlapping work. The newsrooms’ feature departments also will work to develop jointly produced sections."

Quarles didn’t rule out further changes in the future.

“I certainly hope these are the last cuts we ever have to make,” he said, “but there are no guarantees.”

Quarles also said the reductions include The Cary News and the Smithfield Herald, which also are owned by McClatchy. Quarles oversees those publications. “Every unit” was affected by the cuts, he noted.

McClatchy, which also owns the Observer, the Kansas City Star and Miami Herald, will trim about 1,400 employees. The staff reductions are part of a plan to reduce overall expenses by $95 million to $100 million over the next four quarters.

McClatchy (NYSE: MNI), the nation’s third largest newspaper chain is based in Sacramento, Calif. It reported May 21 that revenues for the first four months of 2008 were down 14 percent from the same time period in 2007. McClatchy stock hit a 52-week last week of $7.59 per share.

Shares opened today at $8.15 and dropped 10 cents in early afternoon trading. They closed at $8.02.

The N&O employs some 900 people.

McClatchy’s new media division, McClatchy Interactive, is also based in the Triangle. Chris Hendricks, vice president of interactive media for McClatchy, declined comment about whether layoffs would occur in that group.

"The effects of the current national economic downturn - particularly in real estate, auto and employment advertising - make it essential that we move faster now to realign our workforce and make our operations more efficient," said McClatchy Chief Executive Gary Pruitt, in a statement.

McClatchy said in April that it swung to a loss in the first quarter as a weakening economy and competition from online rivals led to a 15 percent plunge in advertising revenues at its newspapers.

On Monday, the company said May revenue fell 15.1 percent year-over-year, and ad sales were down 16.6 percent. Declines in print advertising were partially offset by a 12.9 percent gain in online advertising revenue last month.

For the first five months of the year, total revenue has declined 14.2 percent, including a 15.4 percent drop in ad sales. Online ad sales have grown 11.9 percent year to date.

The complete text of Quarles' letter to N&O employees:

"I am writing today to tell you that The News and Observer is reducing its workforce by 70 positions, or about 8% of the total.

"This is a painful but necessary step. We're operating in a time of great change and challenge for our operations, for The McClatchy Company and for the newspaper industry overall. Increased competition and a pronounced economic downturn have combined to reduce revenues dramatically, and these cuts are part of the way we must respond. As you know, we have already been transitioning to new ways of doing business, and we are now accelerating that effort. We are confident in our ability to navigate to a stable and prosperous future as an integrated media company serving as our community's most trusted supplier of news and advertising information.

"Reductions will occur in News, Production, Circulation, Advertising, Information Services and Marketing. Employees affected by this reduction are being notified as quickly as possible and being provided with information about the severance program and their last day. They will be provided with a transition package that includes severance pay and benefits continuation. We also will provide outplacement services.

"As a news company, we have often reported on such transitions in other industries. Now we face the painful reality of severing employment ties with valued friends and colleagues, many of whom have served the company well for many years. We are sorry to do so and will do everything possible to make their transition as smooth as possible.

"Other workforce reductions were also announced today throughout McClatchy. A press release detailing those actions - amounting to about 1,400 full-time equivalent jobs, or 10% of the company's workforce - is available at www.mcclatchy.com. As CEO Gary Pruitt says there, "McClatchy is committed to remaining a healthy, profitable company positioned not only to meet current challenges, but to take full advantage of opportunities for growth as we restructure to support our mission of delivering high quality news and information."

"The News and Observer is making other changes in its business model and operations. Those changes will be announced during the upcoming week.

"This is also a difficult and disorienting time for those of us who remain on the job. Your continued effort and dedication are the foundation of our faith in the future, and we know from experience what a talented and productive group you are. The public service mission that has always animated us remains unchanged, but we will need to make many other changes as we adapt to today's far more competitive media landscape. We will be working diligently alongside you to ensure that we do so.

"If you have any questions about the transition program, please contact human resources. If you have any questions about departmental or structural changes, please contact your department manager. Thank you again for your continued service and cooperation."

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