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The next Strib debt bomb: September?

When the Star Tribune’s pressmen turned down management’s contract proposal last Thursday, they ignored a threat from their own leadership: without a “yes” vote, the company would “have a tough time” making a September debt payment, potentially another step closer to bankruptcy.

The Strib missed a quarterly payment in June; at the time, publisher Chris Harte told Strib columnist Neal St. Anthony the paper was hanging on to the cash to help restructure its debt. The next scheduled payment would fall in September.

Since the June default, the Strib has wrested $2.5 million in concessions from its newsroom and $500,000 from its janitors. However, management is seeking by far the biggest bite — around $12 million — from Teamsters mailers, drivers and pressman, plus smaller electrician and machinist locals.

Teamsters local leaders urged their members to take 10 percent pay cuts and reduced vacation time; printing-press crews would shrink and full-time drivers would be laid off before part-timers. Buyouts would also be offered. The mailers and drivers overwhelmingly said yes, but the pressmen’s 77-27 thumbs-down killed the agreement, according to Minnesota Independent’s Paul Schmelzer.

Veteran pressman Steve Pietrzak says union leadership told a membership meeting that without passage, “in September, [Strib ownership] would not be making another payment.”

Driver Rick Sather, who attended a different meeting than Pietrzak, heard a less-dire version. “They said ‘the company’s telling us they would have a tough time making payments in September.’”

Both men said leadership did not utter the “b-word,” but their exhortations for the deal made it clear the company’s situation was dire. Rhys Ledger, a leader of the mailers’ Local 120, said union officials would not comment. The Strib’s media-relations spokesperson did not return a phone call.

Big leverage, big concessions
Circumstantially, the union leaders’ actions indicate bankruptcy is a significant threat. The blue-collar types now have significant leverage; “manning” rules currently forestall Teamster layoffs; the newsroom has no such protection. Also, none of the Teamsters contracts is close to expiring: the drivers’ deal runs for three more years, the pressmen’s 28 months and the mailers’ 11 months, according to tdu.org.

A bankruptcy judge could cancel those contracts, but generally speaking, the fresher an agreement, the less likely a judge will trash it. (This is one factor behind the newsroom’s concessionary “yes” last month.)

Yet despite the Teamsters’ strong hand, their rank-and-filers were being asked to take the biggest cuts. Newsroom types got a 16-month wage freeze and then small increases; the Teamster would get an immediate 10 percent cut. Pietrzak, a 41-year vet, figures the average experienced pressman makes $62,000, so the cut would equal $6,200. Sather, who’s driven for 29 years, says top colleagues make in the mid-50s, so family budgets would absorb a $5,500 hit.

Pietrzak also complains that press-crew staffing, eroded over the years, would shrink low enough to compromise safety and timely delivery. (Management would no doubt say there’s contract-protected fat to be trimmed.)

For his part, Sather says he couldn’t look new retirees in the eye if he approved a provision stripping their health coverage, one of the deal’s provisions. He also says buying out 37 full-time veteran drivers while protecting $13-an-hour part timers undermines bedrock seniority principles.

[4 p.m. addition: It’s important to emphasize the folks voting “no” think the bankruptcy threat is overblown, and thus the company doesn’t need to make workers take as big a haircut. You can see a handout union members got here and here. Pietrzak believes Strib owner Avista made the bad deal, and needs to take a bigger haircut before workers do.]

Get out the rhetorical truncheon
If a deal can’t be cut — Sather says his group was told “if you don’t vote this in, this is our last shot, the company’s not coming back” — the newsroom, with no manning rules, could again be targeted. The newsroom budget is too small to fill a $12 million gap, and Strib managers have made it clear they want to preserve their “content providers.” However, management can reduce newsroom staff at will, as long as they offer buyouts first.

For now, management’s hopes rely on a close ally of Teamsters International President Jimmy Hoffa, Jr.

Hoffa’s local representative, Brad Slawson, Sr., cut the aborted deal, so the push for concessions had authority behind it. One reason the pressmen may have resisted this deal’s charms is that they only merged with the Teamsters in 2005, and have less loyalty to Hoffa’s crew.

Closing a deal might require Slawson to break out the rhetorical truncheon to persuade his new union brothers and sisters to get with the program. For now, negotiations with management have stopped, but union politics are only heating up.

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Comments (4)

  1. Submitted by Jerry Lundegaard on 08/05/2008 - 02:34 pm.

    Why is it that Unions are the last ones to learn how to read a balance sheet? Didn’t these guys learn see what happened to NWA’s machinists? Enjoy your inflated salaries for another 30 days because it’s all coming to an abrupt end.

  2. Submitted by Paul Schatz on 08/05/2008 - 04:25 pm.

    The financial kingpins who bought the Strib at inflated price, took on too much debt and now are begging for concessions obviously had their problems with balance sheets, p&ls and projections. These guys have mba’s– maybe we should take shots at them for running the Strib into the ground before we take shots at guys driving trucks. After all, the truck drivers are honoring their agreement, it’s the financial kingpins who are defaulting on debt and breaking contracts (and, oh yeah, probably walking away with millions.)

  3. Submitted by John Olson on 08/05/2008 - 06:09 pm.

    Ah yes, the ever-popular “private equity firm.” Buys a business and proceeds to suck as much equity as it can and then dump what’s left on the side of the road.

    I can hardly wait to see what eventually happens to Chrysler.

  4. Submitted by Jerry Lundegaard on 08/06/2008 - 03:26 pm.

    Ignorance is in great abundance here. That’s not how private equity deals work. Yes, Avista greatly overpaid for the Strib. They were morons. But the fact is the business model of legacy newspapers is dead. The great event is at hand. The unions will need to concede or go down with the ship.

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