GateHouse official announces pay cut

Media Nation just received a copy of an e-mail sent out to GateHouse employees in Eastern Massachusetts from Rick Daniels, the CEO and president of GateHouse Media New England. Bottom line: a 7.75 percent pay cut. Here is the full text:

A MESSAGE FROM RICK DANIELS, CEO/PRESIDENT GHMNE

As we all know too well, the road out of the horrendous economic and advertising slump has been extremely difficult, and yet we have a lot to be proud of on how we have responded. We are still bringing valuable and unique local news, information and advertising to our huge print and digital audiences. Together, we have taken many tough actions that have preserved — and often enhanced — our capabilities, while substantially decreasing GHMNE’s structural costs.

Regrettably, we need to share some tough news: Beginning June 1, we will implement a temporary reduction of our salaries and wages. The average GateHouse Massachusetts employee will see a reduction of about 7.75%. If this were to last through the remainder of 2009, the effect would be to reduce 2009 salaries by about 4% — given it is not starting until June. Rates will vary, and will be “progressive” — meaning that higher earnings will be reduced at higher rates. Your supervisor will share your amount with you. All publications and units in Massachusetts are affected by this step. We are sitting down — today — with representatives of our unionized colleagues to start negotiations on this issue. We expect participation from all — fully and soon.

Why are we taking this step? Why now? It’s really pretty simple: As much as we have done everything in our collective power to blunt the negative effects the economic crisis has had on advertising, virtually ALL major metropolitan markets have been hit by advertising declines that have soared to the mid-twenties to mid-thirties percent (compared to prior year months) since early January. These revenue declines have dramatically hit the cash flows of most publishers.

We are NOT — thankfully — in the kind of trouble that we never want to be in — producing lots of red ink, HOWEVER, if we don’t act soon, and decisively, we could see advertising trends reduce our revenues to a point where we could no longer cover our cash expenses with any margin of safety. Common sense tells us that when companies start suffering from negative cash flow, there is NOTHING good that happens, and these days, with lenders and vendors on short strings themselves, the “bad stuff” happens quickly. We seriously considered a wage reduction earlier this year, but given the obvious difficulties a pay cut creates for each of our family’s finances, we decided to make sure we were not going to see an advertising rebound that could allow us to avoid this painful step. We also considered the possible use of additional staff reductions to generate the almost $2.5 Million of savings this pay cut will generate for the remainder of 2009. Such cuts would have to be about 100 positions, and we did not believe we could continue to operate and deliver the high levels customers value were we to quickly cut this many positions.

We are hardly alone in taking this step. In fact, a great many publishing companies have already taken steps to reduce their single biggest expense — compensation, using furloughs, pay cuts, or even both. While we might be a bit “late” vs. our peers, it’s not too late for us given the many aggressive cost reductions we have already made. At this point, GateHouse Massachusetts is the only GateHouse region that is implementing pay reductions, because we, being in a major metro market, have seen substantially greater losses in advertising expenditures. Because no one can predict the economic future, we can’t reasonably predict when revenues and cash flows will strengthen to the point where there is little concern about cash flows being stable and safe (i.e. positive) levels. Obviously, the sooner we can end this temporary reduction, the better — for all.

Some might ask: Aren’t newspapers dead anyway? Are we just prolonging the inevitable? As a consumer and advertising medium, newspapers that deliver truly unique news and information are still very much in demand, although some very important parts of the business model, including the need to be fluently digital, are changing. One of the largest advertising agencies in the country visited us recently with a very simple message: Large local newspaper companies, with some changes, will be the major beneficiaries of the newspaper industry restructuring. Our industry IS going through wrenching changes, but a great many of the changes that are bedeviling major Metro papers are poised to benefit us — as long as we remain economically sound in the near term. We will keep you informed about our challenges, AND our victories.

The senior management team and I will be conducting employee information sessions at a great many of our locations in early to mid June, we look forward to updating you further at these meetings. Thank you — in advance — for your willingness to support personally difficult steps during these times that WILL allow us to grab the opportunities that arise out of adversity.

Richard Daniels
President and Chief Executive Officer
GateHouse Media New England
Publisher, The Patriot Ledger and the Enterprise