Bloody Monday: McClatchy to reduce workforce by 10 percent

The McClatchy purge is underway. Here is today's press release:

The McClatchy Company (NYSE: MNI) announced today that it plans to reduce its workforce by about 10% as the company accelerates efforts to manage through today's difficult advertising market and position itself for future success in an increasingly competitive environment.

"We have been transitioning steadily and successfully from a traditional newspaper company to an integrated multimedia company for some time," said McClatchy CEO Gary Pruitt. "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. I'm sorry this requires the painful announcement we are making today, but we're taking this action to help ensure a healthy future for our company."

McClatchy said it is reducing workforce through both voluntary and involuntary separations, as well as managed attrition, involving about 1,400 full-time equivalent employees (FTE's). The company will retain its strategic focus on sales, news and online operations as it realigns operations, with decisions about the size and profile of changes differing by location.

McClatchy historically has not used broad layoffs to manage staff size, relying instead on attrition and selected job eliminations through outsourcing. This has been an effective strategy, resulting in workforce reduction of 13% between the end of 2006 and April 2008, but today's more competitive media environment and challenging operating conditions mean the company must move more aggressively to shape the overall workforce.

"It's important to recognize this move as part of a continuing, strategic vision for successful future operations, not solely a response to today's adverse conditions," Pruitt said. "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. Our five-year plan has recognized the need for a workforce smaller than today's; in adjusting to the current economic environment, we find we must move more quickly to that goal."

McClatchy's cash expenses were down 10.5% in the first quarter of 2008 and FTE count was down 7.5% from prior year.

The moves announced today will produce annual savings of about $70 million from staff reductions as part of a plan to reduce overall expenses by $95 million to $100 million over the next four quarters. Combined with previous expense control initiatives, the company expects to reduce non-newsprint cash expense in the low double-digit percentage range over the balance of 2008 excluding severance costs of about $30 million.

McClatchy has continued to grow total audience even in today's economic climate. Adding newspaper readership to the unduplicated reach of online, digital and niche products, the company's local media franchises in 29 premium markets nationwide reach on average 70% of the adults in their communities. Online audience growth of 25% in 2007 far outpaced industry averages, and the first quarter of 2008 saw even more dramatic growth of 41%.

"Growing audience has always been the best predictor of future success for any media company, and in our case it is also an essential foundation for our public service mission," said Howard Weaver, McClatchy's vice president, news. "As difficult as it is to say farewell to valued colleagues, we continue to employ by far the largest and most experienced newsrooms in each of our communities and will continue to do so. They enjoy greater reach and employ better tools today than ever in our 151-year history, and we do not intend to slack in pursuing our obligations."

McClatchy said the company would work to ensure a smooth transition during the downsizing, providing severance payments and benefit continuation to affected employees. "We will move as quickly as possible to inform those affected by this plan and will work hard to treat them with the respect owed to colleagues whom we will all miss," said Heather Fagundes, the vice president for human resources at the company.