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At Los Angeles Times, a Civil Executive Rebellion
After Jeffrey M. Johnson, the publisher of The Los Angeles Times, openly defied his bosses at the Tribune Company last week by refusing to make layoffs at the paper, he was summoned to Chicago and spent Tuesday meeting with top executives.
The remarkable thing about the meeting, to Mr. Johnson’s colleagues back in Los Angeles, was that he was not fired.
Colleagues said he returned to Los Angeles and told them he had reached “an understanding” with Chicago, at least for now. “Let’s focus on running the business,’’ he told them.
This latest development has led some at the newspaper to hold out a degree of hope that both Mr. Johnson and Dean Baquet, the editor of the paper who also defied Tribune, may be able to keep their jobs. But while a showdown has been temporarily averted, the standoff between Tribune and the top executives at its biggest newspaper remains a major issue.
The Tribune board is meeting today in Chicago and is expected to focus on another problem troubling the company: a demand by the Chandler family, the company’s biggest investor, to unwind partnerships the family has with Tribune, which owns 11 newspapers and 25 broadcast outlets and the Chicago Cubs.
Dennis J. FitzSimons, chief executive at Tribune, is expected to present a plan to extricate the company from those partnerships, according to someone with knowledge of the negotiations. That would allow the board eventually to consider other strategic options, like selling off its television stations or possibly putting some or all of its newspapers up for sale, as demanded by the Chandlers and other shareholders.
At the same time, some of Los Angeles’s most prominent citizens are up in arms over what they say has been the Tribune Company’s diminution of a prized public trust, with three local billionaires stirring the pot with their own separate plans for buying the paper.
But it is Tribune’s handling of the growing rebellion in Los Angeles that has riveted the attention of the newspaper industry.
At The Los Angeles Times, the fourth-biggest newspaper in the country, more than 400 members of the 940-member editorial staff have signed a letter to Tribune supporting Mr. Johnson and Mr. Baquet. Strikingly, some on the paper’s business side, too, are expressing frustration with management, citing tensions between centralized control from Chicago and local control in Los Angeles, particularly over the newspaper’s Web site. “The challenge the Tribune is struggling with is that Los Angeles is such a large brand, they don’t really know how to handle it,” said one business executive at the paper.
In a statement last night, Scott C. Smith, president of the Tribune Publishing division, said: “Our commitment to great journalism will not waver.”
Still, the question remains: Will Mr. FitzSimons fire Mr. Johnson and Mr. Baquet and thereby risk a full-scale revolt at Tribune’s biggest property? Or will he try to smooth things over and thereby risk undermining his authority with his other editors and publishers? “Tribune is in a box,’’ said Conrad C. Fink, who teaches newspaper management at the University of Georgia.
“Their instinct probably was to immediately fire both the publisher and the editor and for some reason they hesitated, and now the staff have signed a petition and they would be out in the streets with placards in 30 seconds,’’ he said. “But all reason in management practice would say the publisher and editor must go.’’
Mr. Johnson and Mr. Baquet, both of whom assumed their jobs last year, have told friends they do not know what to expect regarding their futures. Before Mr. Johnson left Chicago Tuesday, they had told friends they could be fired. But with the company facing so many other problems, those friends said, they could be safe, for now. Last year, Mr. Johnson and Mr. Baquet oversaw $10 million in cuts and the loss of 85 jobs.
In a memo to his staff last night, Mr. Johnson said that during his meeting in Chicago, he had “reiterated our commitment to build a credible financial plan in the coming weeks that is grounded in actions and initiatives that efficiently build readership and revenue.”
According to a Tribune executive, the new demands on Mr. Johnson and Mr. Baquet now include keeping the paper’s expenses flat for 2007, forgoing an expected $3 million increase; cutting the editorial staff of 940 by an unspecified number that could exceed several dozen; and making an additional $17 million, or 7 percent, in profits, which could also require additional cost cuts since revenue has been flat.
The company has been under pressure from shareholders to improve its stock price, as have many media companies. Ariel Capital Management, a Chicago-based money management firm, and one of Tribune’s biggest investors, suggested yesterday it expected the company to take some sort of action.
“We support the board in taking steps to close the substantial gap that exists between the stock price and the intrinsic value of the company,’’ said Charles K. Bobrinskoy, vice chairman of Ariel. While the stock closed yesterday at $30.69, some industry analysts have placed the value closer to $45 a share.
“Whether these steps involve taking the company private, selling the L.A. Times or the Cubs, or spinning off broadcasting, as some have speculated, all are viable options,’’ Mr. Bobrinskoy said. “We have every confidence that the board will choose the options that are in the best interests of shareholders and the company.’’
Another investor, Frank Garamella, of Missouri, has filed a suit against the company’s directors, saying they have harmed shareholders by taking on $2.4 billion in new debt in a stock repurchase plan when they should instead have considered selling The Los Angeles Times.
In addition, Nelson Peltz, an activist shareholder, has acquired 1 percent of Tribune stock. Mr. Peltz’s plans regarding Tribune are not clear, but he has a history of forcing actions at other companies in which he has a stake.
The Chandler family went public earlier this year with their anger over management of the company. The Chandlers said they wanted Tribune to spin off its television stations or break up. The company could not do so in part because it was enmeshed in two complicated financial partnerships with the Chandlers.
A group of 20 prominent Los Angeles citizens who sent a letter last week to the company, urging it to cease making cuts, are a loosely formed group of business people in charge of nonprofit organizations. They meet frequently to discuss issues facing greater Los Angeles, and they include Warren Christopher, former secretary of state under President Bill Clinton, who is the head of the chamber of commerce and the president of the city’s chapter of the Urban League.
The group’s members say they are less interested in finding new owners for the paper than in improving what they say are flaws in its local coverage and getting Tribune executives in Chicago to see things their way.
“People don’t like policy issues here,” said Brendan Huffman, president of the Valley Industry and Commerce Association. “But the fact is that we are the world’s 17th-largest economy and it is very important to cover these stories and educate the population.”
While those who seek to buy the paper outright agree with the business leaders about the paper’s coverage, they see themselves as the solution. The potential buyers include three billionaires: David Geffen, the music mogul; Eli Broad, the philanthropist; and Ronald Burkle, a supermarket tycoon.
Mr. Geffen has told friends that he recognizes the paper could be expensive but that he was prepared to pour hundreds of millions of dollars into it. He has said he would buy the paper with his own money and would be happy with a 5 percent return on investment, far below what The Los Angeles Times has said is a 20 percent profit margin now.
Mr. Broad favors the model of The St. Petersburg Times, which is owned by a nonprofit journalism foundation, the Poynter Institute, and would like to see his philanthropic foundation team up with other local institutions to purchase the paper. “The paper needs to be locally owned,” he said.
