Update: MediaNews Outsources Jobs to India, Lays Off Dozens of East Bay Staffers

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MediaNews revealed on Friday that it had told its advertising production staffs at the Contra Costa Times and its ANG Newspapers chain -- which includes the Oakland Tribune -- that the company is outsourcing their jobs to India. According to one source, an estimated 35 jobs are to be eliminated in the East Bay over the coming weeks and months. Ad production staffers design and make newspaper ads. In addition, Denver-based MediaNews fired dozens of employees at its East Bay papers on Friday; disclosed plans to slash another 64 union positions at the San Jose Mercury News in the coming years; and began laying off advertising and business staff members at ANG and the CC Times. MediaNews plans to require this last group to reapply for their jobs at the company's new "shared services center" in San Ramon.

MediaNews intends to ship the ad production jobs to Express-KCS, a U.S. company with operations in India, according to a memo sent to all ANG and CC Times employees by publisher John Armstrong. "Based on our current timetable, this will result in the phasing out of production artist, typist and proofreader positions between December 8 and March 30," Armstrong wrote. The move came as a shock to some ANG employees who thought the ad production jobs also would be moved to the new center at Bishop Ranch Business Park in San Ramon. MediaNews, meanwhile, also is studying whether to outsource its ad production staff at the Merc, according to a memo from the San Jose Newspaper Guild, the union that represents Merc reporters, photographers, editors, and ad staffers.

In addition, MediaNews began terminating dozens of workers -- management and non-union employees -- on Friday. "The job eliminations came in all divisions, at many locations," Armstrong said in his memo. "Eliminated positions include Vice President/Advertising (ANG), Vice President/Editor (Contra Costa), Vice President/Circulation (ANG) and a number of middle management positions at Contra Costa and ANG." ANG also plans to layoff eight newsroom union members on Monday.

It was unclear Friday how many -- it not all -- of the advertising and business staffers at ANG and the CC Times will be laid off and forced to reapply for their jobs at the San Ramon center. However, according to one source, some of the layoffs have already begun. "One ad person told me, 'They're handing out pink slips like candy,'" the source said. In an earlier memo to employees, George Riggs -- who is Armstrong's boss -- said advertising and business staffers who are rehired at the San Ramon center will receive the same pay and benefits they had at their old jobs. However, MediaNews intends to downsize the total number of jobs at the center, as part of the cost-savings plan it developed after purchasing the CC Times and the Merc in August.

Kevin Keane, executive editor for ANG and the CC Times, now known as the Bay Area News Group, declined to comment on the day's developments. In his memo, Armstrong blamed declining ad sales, plummeting circulation, and competition with Internet sites for the outsourcings, firings, and layoffs.

The disclosure of additional union job cuts at the Merc, meanwhile, came during negotiations yesterday. The company told union officials that it hopes to save $4.8 million by eliminating another 64 union positions at the Merc that would "duplicate the work of other MediaNews properties," according to a union memo. Those 64 job cuts would be on top of the 101 total Merc staffers -- including 69 union members -- that MediaNews plans to layoff next month, plus another 116 total Merc staffers -- including 35 union members - it plans to let go in March.

On Thursday, union officials asked the company to share its financial records so they could examine for themselves why MediaNews needed to eliminate so many jobs. The company refused.

Here is the John Armstrong memo:

    Dear Colleagues:

    As I have noted in recent messages to you, a darkening revenue picture has caused us to urgently look for ways to reduce our operating costs.

    In the July-September quarter, our combined revenues at Contra Costa and ANG newspapers were down more than 3% from the same period a year earlier due to declines in both advertising and circulation. The outlook for the current quarter gives us no reason to believe these trends will improve.

    To the contrary, much of our current revenue problem stems from permanent changes in the marketplace or economic downturns that figure to be with us for a while. The former refers to migration of ad dollars to the Internet and the continuing slippage in newspaper readership across the country while the latter refers to the sudden and steep decline in the Bay Area real estate market.

    We had seen most of this coming, of course, and over the past several months we reduced our operating costs by eliminating unnecessary spending and reducing the size of our workforce through attrition.

    But those steps have not been sufficient. Our operating profit in the July-September quarter was 5% below that of the same quarter in 2005.

    With that as background, I write to inform you of two important actions we took this week.

    We informed our advertising production staffs yesterday that we have decided to outsource their work to a company called Express-KCS, a U.S. company with operations in India. Based on our current timetable, this will result in the phasing out of production artist, typist and proofreader positions between December 8 and March 30. This is being done to reduce the expense of producing ads so we can offer print rates that are more competitive with low Internet rates.

    Additionally, today we informed a number of employees that their positions were being eliminated. The job eliminations came in all divisions, at many locations. Some of these departures were voluntary.

    Most of the job eliminations stemmed from our need to reduce operating costs, but some came as a result of reorganizations implemented in the Advertising and Circulation divisions. People directly affected by the Advertising and Circulation reorganizations were informed of those changes earlier this week.

    These reorganizations, and one announced some time ago in the Editorial Division, reposition us in the East Bay to not just survive but to thrive in a very challenging environment.

    Job reductions have been spread across the company and up and down our two organizations. Eliminated positions include Vice President/Advertising (ANG), Vice President/Editor (Contra Costa), Vice President/Circulation (ANG) and a number of middle management positions at Contra Costa and ANG. As I noted earlier, we relied on attrition as much as possible.

    There are more changes in the offing as we migrate business operations to the new Shared Services Center in San Ramon, streamline production, abandon unnecessary office space, develop new offensives to build our revenue base and reposition ourselves to be a more powerful force on the Internet.

    We already have had some notable revenue successes as the new Bay Area News Group, through the increased cross-sell of advertising among our newspapers and Web sites and working together on special sections (such as Valley Life), niche publications (Fronteras) and new initiatives (a virtual job fair on the Internet). You will learn more about our revenue initiatives in the weeks ahead.

    In the meantime, we ask for your understanding and support as we cope with great changes that no less an authority than the dean of the Graduate School of Journalism at Columbia University describes as amounting to a "revolution" and "huge shift" in our business.

    As always, your comments and questions are welcome.

    John Armstrong

Here is the San Jose Guild memo:

    Guild Bargaining Bulletin #11 Nov. 10, 2006

    (This bulletin was drafted by the bargaining committee to provide an update on Thursday's negotiations session. It was written prior to George Riggs' e-mail this morning. We do not believe his message raises any new matters that need to be responded to immediately, but we will consider a fuller response on Monday when the committee meets. The many members who attended ourunion meetings yesterday are aware of our direct response to most of these points. If you have any questions about anything in the publisher's e-mail, please don't hesitate to contact a member of the bargaining committee in person, by phone, or at the private e-mail address listed below.)

    Company and Guild negotiators met yesterday (Nov. 9) and discussed company proposals regarding wages and jurisdiction.

    The Guild requested a review of the company's financial records in an attempt to understand the economic issues, including MediaNews' debt structure, that are driving the company's plans for layoffs and demands for significant contract concessions. The company said it would not comply with the request.

    In response to questions, the company clarified that under its two-tier proposal, existing employees who had not yet reached the top minimum on the existing contract schedules would not continue to receive step increases under the existing contract but instead would be subject to the company's new, second-tier minimums. For example, a Schedule 1 employee with two years experience would not continue to receive step increases through year six, reaching the existing top minimum of $1,229/week. Instead, that employee would not advance beyond the current "after-two-year" minimum rate of $992.24/week. The new, lower-tier schedule has a top minimum after three years of $836/week.

    The company also responded to a question left open last week regarding how its proposed elimination of Guild jurisdiction over current work would save $4.8 million a year. The company explained that the savings would be achieved by eliminating positions that duplicate the work of other MediaNews properties. Whether reached through attrition or additional layoffs in the future, the savings figure is based on eliminating 64 additional Guild jobs in the next several years. These cuts would be over and above those cuts already proposed to be eliminated through the current round of layoffs (scheduled to take effect December 19) and proposed shift of finance and advertising call center employees to San Ramon by March 2007. The company expressed its desire to eliminate duplication of advertising sales territories across its Bay Area papers. For the newsroom, the company said it didn't find it necessary to have more than one reporter from a MediaNews property covering the same event.

    The Company has acknowledged it cannot move Guild work to San Ramon without negotiating with the Guild, because the work falls under Guild jurisdiction in the current contract.

    To summarize recent history and current and prospective job cuts, the Guild lost 49 positions (including 44 in the newsroom) through the 2005 buyouts. The company is now planning to eliminate 69 Guild jobs through layoffs next month and eliminate another 35 in the proposed shift of finance and call center positions to San Ramon. And then there would be another 64 jobs eliminated over the next several years. That totals 217 positions lost, with much of the work that had been done in the past or is currently being done by Guild members being performed instead by employees at other MediaNews properties. (For perspective, there were 445 full-time equivalent Guild positions at the Mercury News as of January 1, 2006.)

    In a related matter, though not directly affecting the Guild, the company stated that the Alameda Newspaper Group and Contra Costa Times will be outsourcing ad production to India. The Mercury News will also study the possibility of such outsourcing of work performed by members of the Typographers union, who currently are covered under a contract that expires June 30, 2007.

    The next bargaining sessions arescheduled for Nov. 21, Nov. 28 and Nov. 30.

    The company was represented by Marshall Anstandig, Andy Huntington and Kathleen Slattery.

    The Guild was represented by Nick Warner, Dennis Uyeno, Suzanne Arnaud, Becky Bartindale, Mary Anne Ostrom, Barry Witt and Luther Jackson.

Here is the memo from George Riggs:

    This is being sent on behalf of George Riggs November 10, 2006

    Colleagues:

    As a follow up to the announcement made last week regarding California Newspapers Partnership's (CNP) shared services center in San Ramon, I wanted to give you the highlights on the salary and benefit plan approved by CNP's board that will be offered to employees that CNP hires.

    First, CNP will match the salaries currently being paid to employees at the local properties. Future increases would be based on merit, and generally determined during annual performance reviews.

    CNP will also match employees existing vacation levels. In other words, if you currently earn four weeks per year, you would be hired with four weeks per year. However future vacation increases would be under CNP's vacation schedule, which is as follows: 0-9 years-3 weeks; 10-19 years-4 weeks; and 20 years-5 weeks.

    In addition to vacation, there are eight paid holidays: New Year's Day, President's Day, Memorial Day, July 4, Labor Day, Thanksgiving, the day after Thanksgiving, and Christmas Day. Employees will also be entitled to a paid day off for their birthday.

    Healthcare benefits and employee premium share would match the CNP plans currently offered to non-represented employees at the San Jose Mercury News, Alameda News Group and Contra Costa Newspapers. In order to be eligible for benefits, employees must work 32 or more hours per week.

    CNP will also honor an employee's existing sick bank, capping at 130 days. Sick accrual rate would be 10 sick days per year, also capping at 130 days.

    A 401(k) plan is offered and the company will match the first 6% of your pre-tax contributions at 50%.

    There is a Long-Term Disability plan that provides 60% of earnings with a maximum of $6000/month.

    Additional details about how to apply for positions at CNP will be provided at a later date, but I wanted to provide this much information as quickly as possible to answer any questions you might have.

    Sincerely,

    George Riggs President, California Newspapers Partnership

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