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McClatchy (NYSE: MNI) Newspapers, the third- largest newspaper chain in U.S., has announced that it will go deep and dramatic with its cuts: 1,600 jobs, which means about 15 percent of the total full-time workforce, and it will also cut wages for the rest of the employees, as part of the previously announced restructuring. It expects to incur severance costs of around $30 million. The company has also previously said that it will suspend executives’ bonuses as part of a wider $300 million savings initiative; Chairman and CEO Gary Pruitt will take a 15 percent cut in his base salary and won’t receive a bonus for 2008 or 2009. Other executive officers will see their salaries fall 10 percent and also won’t get bonuses through 2009. In addition, the company has reduced the cash compensation, including retainers and meeting fees, paid to its directors by about 13 percent, and the directors declined any stock awards for 2008 and 2009.
Each newspaper in the company will decide which areas to cut from, but will try to retain jobs/focus on sales, news and online operations, the company said. Which leaves admin, print expenses and who knows, even print closures.
Pruitt explains the added cuts: “We previously discussed a plan to reach a targeted level of cost savings, but given the worsening economy, we must do more. I’m sorry we have to take these actions, but we believe they are necessary.”
In its Q408 earnings announced last month, the company’s revenues shrunk 17 percent and it reported a net loss of $21.7 million. The company has about 30 daily newspapers (The Miami Herald, The Sacramento Bee, The Kansas City Star, and others), around 50 nondailies, and direct-marketing and direct-mail operations.
McClatchy is still trying to recover $5.3 million owed by newspapers it had sold to companies that have recently filed for Chapter 11 bankruptcy protection, reports AP. It also has its own debt worries. The company owed about $2.04 billion as of the end of 2008, stemming mainly from its 2006 acquisition of the Knight Ridder newspaper chain. While the job cuts will not solve all McClatchy’s troubles, the company said its cost-control efforts excluding severance and other benefit charges related to previous reductions led to a 14.4 percent drop in cash expenses for the fourth quarter.
Given the troubles it faces, it’s not too surprising that the announcement did not impress investors, as McClatchy’s stock’s was down 25 percent by mid-morning to $0.44.