The Strib and PiPress, Our GM and Chrysler
By Brian Lambert
I spent a big chunk of the weekend wading through a couple weeks' worth
of issues of The Wall Street Journal and The New York Times. By the
time I finished, I realized I hadn't felt so nauseated since the time I
accidentally chugged ten ounces of curdled milk. We have only just begun
to fall off the cliff.
If ignorance is bliss, I'd like to roll the clock back to the good old days when the ritual this time of year was ogling the new cars from Detroit and thinking, "Man, are we cool or what? The damn Rooskies don't have anything with fins that big."
One of the pieces I caught up with was a column by David Brooks of the Times titled, "Bailout to Nowhere," discussing what to do with the Big Three auto makers. As you know, the car moguls are trying to shake D.C. down for billions in taxpayer money, which no one seriously expects will do anything but buy them three or four months to fiddle while their industry burns. Brooks sees little point in handing the car makers cash, and at one point remarks:
"If Detroit gets money, then everyone would have a case. After all, are the employees of Circuit City or the newspaper industry inferior to the employees of Chrysler? It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It's C.E.O.'s. It's politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state."
Brooks, of course, is persona non grata with Rush Limbaugh/Sarah Palin conservatives for phrases such as "crony capitalists" and "stagnant corporate welfare state." But he at least is making a coherent, valid point. No one needs my opinion of what should be done here . . . but here it is anyway.
For $25 billion (plus the previous loan package), the federal government could do a hell of a lot to guarantee pensions and at least some level of health benefits for workers at the car manufacturers and their primary parts suppliers through post-bankruptcy proceedings and shakeout. So why not do that? There seems to be no chance in hell that the cash is going to do anything to turn GM, Ford, or Chrysler around in the next six months.
I applaud the idealism of using a bailout to force American car makers to build "green," but you still can't guarantee anyone will buy an American "green" machine over next year's model from Honda or Toyota.
So let bankruptcy do what the U.S. car industry has needed to do for a decade: radically reduce product lines and the number of dealerships and, yes, substantially rewrite union contracts. I take no pleasure in saying this. I do not buy the partisan rhetoric that the unions are to blame for the car makers' problems. No union forced anyone to build the Pontiac Aztek, the Ford Excursion, or the Hummer H2. No union, post the Katrina oil spike, insisted that GM introduce another half dozen 5,000-pound "crossover" SUVs. No union included in its list of demands a promise from Ford, Chrysler, or GM that they avoid building a competitor to, say, BMW's Mini Cooper, something stylish, safe, fun to drive, and loaded with amenities.
The car makers did all that to themselves via their "stagnant corporate welfare state."
But the reality is that we are all going to take a major haircut over the next year or more, and '80s-style labor contracts matched with '70s-style market strategies means certain doom for GM, Ford, and Chrysler. Bankruptcy negotiated and protected Draconian cutbacks at least hold the promise of something left standing in Detroit by next summer.
But it was Brooks's line about bailing out newspapers that echoed back at me when I caught wind of the latest memo from Chris Harte, publisher of the Star Tribune and frontman for the Avista Capital Partners ["stagnant corporate ... "] private equity "team" that has, I think, less chance of surviving (in anything resembling its current condition) until next Memorial Day than Chrysler.
David Brauer, over at MinnPost, put up Harte's memo almost as soon as it was released.
Said Harte:
Like GM and Chrysler (Ford still has a pulse), the Strib and PiPress are on a track to inevitable oblivion, and there isn't a lot of track left. A year ago, I was saying there would be only one paper in the Twin Cities within three years. I'm officially moving that prediction up to nine months. Neither property has any palpable viability. We've all known that Avista is so far underwater with the Strib ($400 million in debt, with maybe . . . maybe . . . $80 million--max--in current value), there is no hope, short of some kind of Third World debt-forgiveness plan, that it will function as anything more than a "brand" sans most of its primary resources a year from now. The PiPress and Dean Singleton's MediaNews Group Inc. is only marginally better off.
If the Strib is a ridiculously overloaded (with debt) Hummer H2 running on rims and showering sparks, the PiPress is a keys-and-heater Neon with a bent key and crapped-out heater. Like GM and Chrysler, we're really just talking about a few more months of full paychecks for some working stiffs with mortgages and tuition payments.
I'm asked occasionally why I don't write about the newspapers as much as I used to. My answer is that the newspaper story is so unremittingly grim and the conclusion so foregone, I can't see the point, other than as a kind of hospice practice.
Besides that, I was constantly struck by how many people--who clicked into a media blog--said they couldn't give a sh*t since neither paper held any interest or value for them anymore.
The problem, of course, is that as Dodge Stratus bland as the Strib and PiPress are, when they are eventually reduced to twenty-first century Yugos or Trabants, we won't have a nice, efficient, comfortable Honda Civic to buy instead.
If ignorance is bliss, I'd like to roll the clock back to the good old days when the ritual this time of year was ogling the new cars from Detroit and thinking, "Man, are we cool or what? The damn Rooskies don't have anything with fins that big."
One of the pieces I caught up with was a column by David Brooks of the Times titled, "Bailout to Nowhere," discussing what to do with the Big Three auto makers. As you know, the car moguls are trying to shake D.C. down for billions in taxpayer money, which no one seriously expects will do anything but buy them three or four months to fiddle while their industry burns. Brooks sees little point in handing the car makers cash, and at one point remarks:
"If Detroit gets money, then everyone would have a case. After all, are the employees of Circuit City or the newspaper industry inferior to the employees of Chrysler? It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It's C.E.O.'s. It's politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state."
Brooks, of course, is persona non grata with Rush Limbaugh/Sarah Palin conservatives for phrases such as "crony capitalists" and "stagnant corporate welfare state." But he at least is making a coherent, valid point. No one needs my opinion of what should be done here . . . but here it is anyway.
For $25 billion (plus the previous loan package), the federal government could do a hell of a lot to guarantee pensions and at least some level of health benefits for workers at the car manufacturers and their primary parts suppliers through post-bankruptcy proceedings and shakeout. So why not do that? There seems to be no chance in hell that the cash is going to do anything to turn GM, Ford, or Chrysler around in the next six months.
I applaud the idealism of using a bailout to force American car makers to build "green," but you still can't guarantee anyone will buy an American "green" machine over next year's model from Honda or Toyota.
So let bankruptcy do what the U.S. car industry has needed to do for a decade: radically reduce product lines and the number of dealerships and, yes, substantially rewrite union contracts. I take no pleasure in saying this. I do not buy the partisan rhetoric that the unions are to blame for the car makers' problems. No union forced anyone to build the Pontiac Aztek, the Ford Excursion, or the Hummer H2. No union, post the Katrina oil spike, insisted that GM introduce another half dozen 5,000-pound "crossover" SUVs. No union included in its list of demands a promise from Ford, Chrysler, or GM that they avoid building a competitor to, say, BMW's Mini Cooper, something stylish, safe, fun to drive, and loaded with amenities.
The car makers did all that to themselves via their "stagnant corporate welfare state."
But the reality is that we are all going to take a major haircut over the next year or more, and '80s-style labor contracts matched with '70s-style market strategies means certain doom for GM, Ford, and Chrysler. Bankruptcy negotiated and protected Draconian cutbacks at least hold the promise of something left standing in Detroit by next summer.
But it was Brooks's line about bailing out newspapers that echoed back at me when I caught wind of the latest memo from Chris Harte, publisher of the Star Tribune and frontman for the Avista Capital Partners ["stagnant corporate ... "] private equity "team" that has, I think, less chance of surviving (in anything resembling its current condition) until next Memorial Day than Chrysler.
David Brauer, over at MinnPost, put up Harte's memo almost as soon as it was released.
Said Harte:
"We will have to cut much deeper, and many of the reductions we make will be painful. But we absolutely must get our budget in line with our revenue.
"Plus, we still have the compound problem of having to fix an unworkable debt structure. We continue to work with our lenders on what form a debt restructuring will take.
"There is just no getting around that
these are bleak times -- the worst I have seen in the 45 years since my
first newspaper job. The only reassurance I can offer is that we are
not alone."
Like GM and Chrysler (Ford still has a pulse), the Strib and PiPress are on a track to inevitable oblivion, and there isn't a lot of track left. A year ago, I was saying there would be only one paper in the Twin Cities within three years. I'm officially moving that prediction up to nine months. Neither property has any palpable viability. We've all known that Avista is so far underwater with the Strib ($400 million in debt, with maybe . . . maybe . . . $80 million--max--in current value), there is no hope, short of some kind of Third World debt-forgiveness plan, that it will function as anything more than a "brand" sans most of its primary resources a year from now. The PiPress and Dean Singleton's MediaNews Group Inc. is only marginally better off.
If the Strib is a ridiculously overloaded (with debt) Hummer H2 running on rims and showering sparks, the PiPress is a keys-and-heater Neon with a bent key and crapped-out heater. Like GM and Chrysler, we're really just talking about a few more months of full paychecks for some working stiffs with mortgages and tuition payments.
I'm asked occasionally why I don't write about the newspapers as much as I used to. My answer is that the newspaper story is so unremittingly grim and the conclusion so foregone, I can't see the point, other than as a kind of hospice practice.
Besides that, I was constantly struck by how many people--who clicked into a media blog--said they couldn't give a sh*t since neither paper held any interest or value for them anymore.
The problem, of course, is that as Dodge Stratus bland as the Strib and PiPress are, when they are eventually reduced to twenty-first century Yugos or Trabants, we won't have a nice, efficient, comfortable Honda Civic to buy instead.
© 2008 MSP Communications, Inc. All rights reserved
What is Harte smoking (has he been hanging around Karl Rove)?
The Strib barely passes as a newspaper as it is. They, like Detroit, need to take their lumps and go Chapter 11. Merging with the Pioneer Press would not eliminate the debt.
Chrysler is ironically owned by a private equity firm that is also under a mountain of debt. Can we call Sid Hartman the gas burning Hemi of the Strib?
LAMBERT: My figure of an $80 million value is purely a guess-timate, obviously. It is based on a ballpark figure floated (separately) by a couple local publishing tycoons last winter -- of around $130 million, then re-factored for the accelerated collapse in valuation through the summer and fall. Frankly, I don't see anyone paying anything for either until they have completely cratered. No one is going to take on Avista's debt, and if McClatchy's $1 stock price is representative ... well, you get the idea.
Posted by: Dave on November 18, 2008 at 10:39 PM
BL - Brooks of course is persona non grata with Rush Limbaugh-Sarah Palin conservatives for phrases like "crony capitalists" and "stagnant corporate welfare state".
Thats not why Brooks is 'persona non grata' wth conservatives. Sloppy, and worse, untrue, in the midst of an otherwise rational piece. Merely a product of your own prejudices.
LAMBERT: You're saying that Brooks is acceptable to the Republican "base"?
Posted by: 108 on November 19, 2008 at 6:42 AM
Bri - not to change the subject, but how about a look at MPR bumping off the Morning Show next month? Folkies and listeners of a certain age are sad. You have a good record in writing about the Kling-on empire, so give it a look?
LAMBERT: I'm at a disadvantage in that I haven't listened to the show in years. But I'll sniff around. Feel free to back-channel with any provocative angles.
Posted by: Digger on November 19, 2008 at 7:11 AM
So much for the Strib's strategy of appealing to younger (non) readers. How much money was wasted on that. Maybe the outcome wouldn't have been much different if the paper had focused on quality journalism instead, and hadn't lurched to the right, both on the news and editorial pages, but it could have retained some dignity.
LAMBERT: Well vita.mn continues while MARQ has been folded. So the "younger" bit -- a joke of course in the daily dead tree -- still has a pulse. As I've said before, I can live with conservative apologists. Just please make them readable.
Posted by: Rob Levine on November 19, 2008 at 8:08 AM
Okay, 108, I'll bite: You imply that there is some other reason than those offered by Lambert why Brooks is persona non grata with the conservative base. What, then? Too many polysyllabic words? Believes in evolution? Reads too widely? Enlighten us.
Posted by: Jim Leinfelder on November 19, 2008 at 11:46 AM
Please tell me "ClaudeNRick" (tm) are still on-board....
God knows every debt laden, audience eroding major metro daily needs a SUNDAY column like THAT to stay viable.
Oh, and CJ.
Say, I'm getting "emergency frequency" from a certain Jazzerciser...any insights?
Gotta run, I think my Obama plate is being delivered today.
Posted by: bertram jr on November 19, 2008 at 11:52 AM
Also might want to think about how much more willing government is to save local sports teams. Most every time the Twins or Vikings are about to leave, the political spin has been, so-and-so doesn't want to be the Governor who lost the Twins/Vikings on his watch. A beneficient investor or unit of government steps forward and the games go on. Interesting that we hear little about how President Bush can't afford to lose America's car makers on his watch or how Tim Pawlenty can't afford to be the governor to lose the Twin Cities' locally-owned major newspapers (but then he already has).
LAMBERT: Is was having this conversation just a couple nights ago. Zygi Wilf's chances of squeezing this state for anything more than street repairs is as close to zero as a newspaper's stock price.
Posted by: Bob Meek on November 19, 2008 at 12:38 PM
Good grief, you two supposedly took a lot of English classes, and further, consider yourselves serious students of political science.
“You're saying that Brooks is acceptable to the Republican "base"?”
No. My one comment is completely decipherable in the manner it’s stated. There is no conflict between Brooks types and the Republican base over "crony capitalists" and the "stagnant corporate welfare state". They are largely in agreement. But by all means, go ahead provide the sources that Rush favors corporate subsidies, that this is emblematic of ‘the base’ as well.
Who was it exactly that voted against the bailout? What reps in what parties representing what fairly easily stereotyped constituencies?
Brooks post election critique of Republicanism is that it’s not inclusive, that the base is too theologically oriented. As such, the base thinks Brooks is a squish, a RINO. There’s the conflict, accurately stated.
So what is your reference to, Brian?
LAMBERT: Well, it's kind of where to begin. Brooks ... and Peggy Noonan, and what's her name Parker are NOT popular with the base -- which I regard as the talk radio "jeer-leaders" (a phrase coined by Howard Fineman, apparently). The odd couple that resisted the bail-out were uber-lefties and fringe righties. "Crony capitalists" would imply the entire "free market" Wall St. ethos of the last few decades. Are you saying Rush was out railing against that, and warning us away from letting "the free market run its course" and arguing that "deregulation has gone too far"? If that's what you're saying, twist me off a couple of whatever you're smoking and send 'em over here.
Posted by: 108 on November 19, 2008 at 1:34 PM
I think you're right that the time for this to become a one-paper town is at hand. But I've got a different idea about who the survivor will be: MinnPost.
LAMBERT: Well they're operating at the pay scale for the next generation of journalists. Let's just hope Starbucks doesn't go under so they can report in the morning and froth lattes in the afternoon for health care.
Posted by: Frogman of Grant on November 19, 2008 at 6:36 PM
HI Brian, I am not a media person, but I love reading your blog. Platt's as well. My question is this - Do the PP and the Strib make money? I don't mean do the companies that own them make a profit, but do the papers themselves turn a profit. Do they bring more money than they spend and if they do why wouldn't somebody keep them going, even if their owners didn't want to?
LAMBERT: Since both are privately held, it is almost impossible to say. The assumption in the summer of '07 was that the Strib at least was still bringing in more than it was laying out in operating expenses -- but that definition DID NOT include the staggering debt service built into Avista's play here. The presumption now, in winter '08, is that the paper is no longer covering the basics -- salaries, newsprint, physical plant, etc. in addition to sinking deeper and deeper beneath the surface of their $400 million-plus debt. This is why I say they are running out of track.
Posted by: jim on November 19, 2008 at 8:37 PM
At the 'Does Journalism Have a Future?' thing at the U of M on Monday night, Nancy Barnes contended that if you take the debt payments out of the equation, the Star Tribune still makes a profit.
She didn't define "makes" and I'm guessing that includes print and online revenue.
LAMBERT: That's possible, I guess. But we're taking her word for it. But the trajectory is ever-more directly downward. I mean, as goes Denny Hecker, so goes the Strib.
Posted by: anonymous on November 19, 2008 at 11:55 PM
Now bertram jr. can eat his red meat of hatred and bigotry as he stares into Obama's face on his 2008 commemorative plate.
Posted by: Robb on November 20, 2008 at 7:58 AM
There were more righties than uber lefties opposed to the TARP bailout. And…the jeerleaders are consistent in their embrace of a free market ethos and a distaste for crony capitalism. It is this ideological purity for which the jeerleaders were maligned.
‘But he at least is making a coherent, valid point’. Uh, no. You legitimize Brooks because you share his view the base has too much theologically influence over the party. Their economic views, at least in terms of this Brooks column, are compatible. Romney has a column out much like Brooks, and it’s both coherent and valid. Say it. You agree with Mitt Romney.
In any event this is a low reward proposition (but I’ll probably keep at it), pointing out that you pathologically inserted and misused a ‘republican base’ analogy where one does not belong. Much of the Brooks column was dedicated to warning against the Democratic inclination to throw good money after bad at the automakers, which included the laughable idea of an Obama administration ‘car czar’. The ball is in the Democrats court. I’m skeptical of your ability to keep framing issues with oblique throwaway comments about Palin conservatives. Or maybe I’m not skeptical.
LAMBERT: By all means, cling to your skepticism. I certainly will to mine. The pass you give your "free market" kids on "crony capitalism" and "corporate welfare" is more convenient than accurate. My point is that the Republican base is built around Rush Limbaugh and the crowd that he can draw. If I've missed any nuance in Rush's arguments for getting government out of businesses way -- i.e. the corporate welfare of absurdly generous, imbalanced tax policies
for the largest and wealthiest, I hope you'll remind me.
Posted by: 108 on November 20, 2008 at 9:51 AM
I have warm memories of the Strib, having grown up reading it. I will miss it when it disappears, but I already miss what it was in its glory days. The sad truth is that I can spend as much time reading the Lakeshore Weekly News these days as any daily version of the Strib. It offers very little substance.
But the Strib isn't General Motors. I will feel badly for those local journalists and other employees who lose their jobs, but the Strib's demise doesn't have a ripple effect across the country. There are many reasons to be critical of the Big Three, but I disagree with David Brooks and/or Mitt Romney who think bankruptcy reorganization is the answer. Chapter 11's for these companies will effectively put them out of business, and will have a catastrophic impact on every community across the land.
I simply do not understand a system that rushes to bailout financial powerhouses which do little more than move paper back and forth while their executives make hundreds of millions, yet will not provide a small fraction of that amount to an industry that actually manufactures a product that is at the heart of the American economy. This is ass backwards. Citibank, Bank of America and Wells Fargo should be the ones going bankrupt, with smaller community banks filling the void and showing prudence in their lending practices. There are no similar American car makers who will do so once the Big Three fold their tents.
LAMBERT: I can't help but think that much of what Hank Paulson wants to rescue and sustain is the American "financial services" empire -- the $62 trillion worth of derivatives -- that produced very little, but concocted havens for loose cash. I gather it is quaint to imagine an economy of America's size actually producing goods of services of value sufficient to absorb all the Chinese and oil producers' cash out there. But when Obama start talking infrastructure in a specific way that offers the possibility of middle class employment I hope he looks passed just "green cars" to a high speed train network ... a la France .. that would take enormous pressure off both roads and air systems. Can't out source that stuff, and if the Chinese want to invest, well fine, but they'll have to pay American labor.
Posted by: A Son of Mississippi on November 20, 2008 at 11:49 AM
"The odd couple that resisted the bail-out were uber-lefties and fringe righties."
I am glad you admit Al Franken is an "uber leftie".
Posted by: Namzso on November 20, 2008 at 3:56 PM
Harte says, "In the 45 years since my first newspaper job." What was that one, tossing out morning editions from his banana-seat bike? And what is this, his SECOND newspaper job?
Guy tries to come off like he's Joseph Freaking Pulitzer when all he really is is frontman for a bunch of money grubbers whose goal of stripping-and-flipping no longer has anyone to flip to, at anything other than a ginormous loss.
Can't Joel Kramer and some of his crony capitalists take the Strib off Avista's hands for the $80 million figure you threw out there?
LAMBERT: The irony of the moment is that the economy is so bad the Strib can't even go into bankruptcy. To do so today means nearly the same as going out of business. There's no credit to reorganize anything. Put another way, the Strib will have to wait for the economy to improve in order to go bankrupt. I think my $80 million figure is generous. No one wants the Strib WITH the $400 million in debt, and I seriously wonder who'd buy, even at $80 million, with no debt at all.
Posted by: Craig Plumfagen on November 20, 2008 at 5:08 PM
The more the public debate regresses into name-calling and moron terms like "uber-lefty" and "socialist" I can only imagine how limited the minds of the people approaching the problems our country faces have become.
My only hope reading this hyperbolic blogger blah blah blah is that it has little or no consequence for a vast majority of Americans. Obviously, the vision behind this talk is so narrow it means nothing.
LAMBERT: I, for one, am chastened.
Posted by: Richard on November 21, 2008 at 8:10 AM
We like "uber-lefty" and "socialist" because they accurately describe the (diseased) mindset of the liberal left / socialists currently running amok.
Say,I look forward to your thoughts on the eHarmony / forced to market to the gays / activist judge story.
LAMBERT: Wha .... ?
Posted by: bertram jr on November 21, 2008 at 2:10 PM
bertram jr.:
You only enjoy the name-calling ad homonyms because there is never any substance behind a single word you utter. Fascist pig. We might as well start calling you the inflammatory names you call everybody else, you goose-stepping hate spewing extremist Nazi.
I think everybody has been way too polite in indulging your mindless quips and thoughtless labeling of others without adding a single word of wisdom.
LAMBERT: And with that we'll pull the plug on this thread.
Posted by: Richard on November 24, 2008 at 8:12 AM