An Uncertain Future p.

By: Robert O'Conner

A little more than a year after the death of publisher Robert Maxwell, his British newspapers remain in limbo sp.

JUST OVER A year after the death of British newspaper publisher Robert Maxwell, the Daily Mirror ? his flagship newspaper ? faces an uncertain future.
The parent company ? Robert Maxwell Holdings ? is in the hands of an administrator, who has been appointed to unravel its debts and eventually to sell off the bank shareholdings that account for 54% of the stock.
A newly installed chief executive has fired the editors of the Daily Mirror and the Sunday People, and dismissed about 100 "casual" employees.
There are concerns that the Mirror's traditional support for the Labor Party will be eroded. Mirror Group Newspapers are the only mass-circulation British tabloids that back Labor.
In addition to the Daily Mirror and the People, Mirror Group also publishes the Sunday Mirror. In Scotland, it publishes the Daily Record and the Sunday Mail.
The new Mirror Group chief executive, David Montgomery, is the former editor of the News of the World and Today, two tabloids published by Rupert Murdoch's News International.
Charles Wilson, managing director of Mirror Group Newspapers, said that Maxwell's death was followed by "a period of discovering and then investigating that chaos that he left behind and trying to put the pieces together again. We have now got in place a new management team and we have strengthened the board of directors."
Wilson dismisses any suggestion that the Mirror will abandon the Labor Party. He points out that such a change would mean that the newspaper would be leaving a market niche it has had all to itself.
"It would be commercial madness to change," Wilson said.
On top of that, "It is right in this country, with such a broad press, that there is [a newspaper] that supports a left-wing view. That's part of a fair democracy."
Wilson added that the whole company ? from board of directors to editorial staff ? agree that the Mirror's political viewpoint is part of its character. "The traditional political line of Mirror Group Newspapers has not and will not change."
The company is under the effective control of John Talbot, head of corporate recovery practice at the Arthur Andersen accounting firm, which has been appointed administrator. Under court-ordered terms, the shareholding banks, to prevent the administrator's control from falling below 50%, are not permitted to sell their stock without permission. The holdings represent stock owned by Maxwell that he had pledged as collateral for loans.
The banks, Talbot said, have agreed "that the best way forward is for me to carry on controlling the shares and to handle the sale of the shares. As administrator, my job is not to be a long-term holder of the Daily Mirror."
Talbot's duties will also entail trying to satisfy creditors, which include various banks and the Mirror Group pension fund looted by Maxwell.
The British system of administration is similar to Chapter 11 protection in the United States but, while Chapter 11 allows companies to retain control over their operations, British administrators enjoy wide management powers. Talbot, for instance, was instrumental in bringing in Montgomery.
"The management," he said, "did need to be strengthened."
Talbot added,"We are taking the view that it's beneficial for us to hold the shares rather than to move to sell them at what we consider wouldn't be the best price."
The banks, Wilson noted, have no interest in a "fire sale" of their holdings. They are willing to wait for either the right buyer or, possibly, a public sale of the shares through institutions.
Such a placing, he said, "would be a good thing from everybody's point of view because the paper would in essence be remaining totally independent. Some people in this country fear that you may get another Maxwell. People fear the single owner, because they don't know who he is or what he's going to be."
Wilson said that, despite Maxwell's wholesale thievery, the Mirror Group newspapers "have continued to publish and sell well. Beneath all the problems, the company has continued to trade very soundly."
Last year's trading profits, he said, would have been in the region of $175 million, and, despite the current recession in Britain, "we're in the same sort of ballpark figures."
However, actual profits, Wilson added, have been reduced by the legacy of Maxwell's illegal activities.
"Before we pay a penny of costs," he said, "we have to pay something like $100 million in interest on the money that we borrowed to fill the holes that he dug in the company."
This includes payments to the ravaged pension fund. The pension fund liability, Wilson said, will be about $260 million over a 14-year period.
The appointment of Montgomery was greeted with dismay by many on the staff. Much of this discontent focuses on his background with Murdoch. There have been suggestions that he is part of a News International invasion of the Mirror.
David Banks, the new editor of the Daily Mirror, has worked for Murdoch at The Sun, in London, and more recently in Australia, and Montgomery's firing of the two editors was seen as a cynical contradiction of the pledge he had made on taking his job that "the editorial independence of our newspapers will be preserved and vested in the editors."
Montgomery also promised that "the left-of-center tradition of all titles" within the group will continue.
Wilson argues that Montgomery's private views will not affect his professional judgments and, as for any News International infiltration, Wilson added, "Everybody in our business knows that if you are a tabloid newspaperman, there are only two games in town: There's Wapping [News International] and there's one here. And if you go into the office of either newspaper, you will find a bunch of people who have worked for the other side. People cross the street."
Wilson, who worked under Maxwell for 10 months, cites himself as an example. He has worked for Murdoch as the editor of both the London Times and the Chicago Sun-Times.
"We're professionals," Wilson said, "and my own political views have nothing to do with what I am doing in my professional life."
Talbot argued that an editor does not "need to be a supporter of the Labor Party to see that the media need to have a balance. I think journalists have always moved from one paper to another."
Derek Terrington, a media industry analyst at London stockbrokers Kleinwort Benson, agrees that the changes at the Mirror Group are not likely to alter the papers' political slant.
"It can't be in jeopardy," he said. "I think they have a well-established constituency of readers with their own particular attitudes and tastes, and I think they will continue to serve them."
The Independent newspaper also argued that the economics of the business suggest that the Mirror will continue to support Labor, but "if ? in spite of apparent commercial logic ? the Daily Mirror decided to move to the right, abandoning large numbers of readers for whom a left-of-center editorial viewpoint is essential, it would not be the end of the world. The market abhors a vacuum. How long before, say, Express Newspapers, repositioned its tabloid Daily Star to exploit the resulting gap?"
Wilson defended the firing of the two editors and the dismissal of the casual employees.
"The reason that the editor of the People left," Wilson said, "was that the People wasn't doing very well and hasn't done very well recently in any sense as a newspaper. The reason that the editor of the Daily Mirror was fired was that the Mirror was rather old-fashioned in its approach in many ways."
The decision to get rid of the casuals, Wilson said, was based on the reasoning "that newspapers are produced better by staff people who are totally 100% committed to their newspaper, and not working for you today and somebody else tomorrow and somebody else the day after."
The financial factors in this move, he added, were important.
"We have to look at cost savings," Wilson said, "because of the state of the company that Maxwell has left us."
The appointment of Banks was not popular with the Daily Mirror editorial employees, who presented him with a vote of no confidence. He responded by sending each a letter seeking a personal pledge of loyalty.
"I would not," Banks wrote, "expect you to continue to serve under an editor whom you felt was unfit to hold office."
The employees decided to return the letters signed, en masse, as a demonstration of the contempt for the whole procedure.
Banks' letter, said Margaret Renn, a member of the committee of the National Union of Journalists that is dealing with management, was "about as low as you can go in industrial relations."
Despite the discontent, there is little prospect of dramatic action on the part of the Mirror unions. The British economy is in deep recession, and there is little doubt that the new Mirror management would see a strike as a declaration of war, to be dealt with forcefully.
Mirror employees fear that the management is itching to take them on, as Murdoch successfully did with his own unions at News International in the late 1980s. Maxwell is regarded as having treated his editorial employees generously.
The position of the Mirror employees has been weakened by an unrelated split within the National Union of Journalists, which has seen about two-thirds of NUJ members leave to establish their own organization. The two groups, Renn said, have been cooperating, but she complained that the management has not been willing to discuss its plans in advance with the unions.
"It's very much an ad hoc situation" between management and the unions, she said. "Something happens and we react, and they react to our reaction, or vice versa."
Since the firing of the casuals, Renn said, there has been some pressure from management for journalists to "work more flexibly across desks."
This might, for example, involve a news copy editor being asked to handle features copy, and Renn said that, despite the continued expressions of support for the Labor Party, there is a fear that the new Mirror Group will behave in its industrial relations like "any old Tory newspaper."
Frank Dobson, the Labor Party's employment spokesman, criticized the firing of the casual employees. He urged the company to rescind its action and negotiate.
"Many of the journalists concerned are casual in name only," Dobson said in statement. "Many work for the Mirror full time. Many have worked for the Mirror for a long time. Some actually supervise full-time staff. All have been loyal to the newspaper in its most desperate hour of need after the collapse of the Maxwell empire."
Dobson noted that many of the Mirror's problems were caused by the looting of its pension fund: "But it wasn't the casual staff who ransacked the pension funds. It was the Maxwell regime, assisted by the connivance or negligence of City financiers who should have known better."
Media industry analysts have reacted positively to the changes at the Mirror.
Terrington, of Kleinwort Benson, said the company is headed for a "major cost-cutting exercise."
He expects further job cuts in editorial and administration.
"They have to make a decision about costs, and that means people. So it's going to be a bit controversial when it happens."
Terrington believes the company is in good overall shape. "It obviously has a lot of debt to carry but, in trading terms, it's pretty solid."
Guy Lamming, an analyst at James Capel in London, believes the long-term prospects for Mirror Group are good.
"They will try and get circulation up," he said. "They will try and maximize advertising revenues in a difficult market. They will cut costs, in editorial in particular. They will try and keep the costs of their newsprint down, and they will try and run a popular newspaper."
Another London media analyst, who asked not to be quoted by name, also stressed the scope for cost-cutting.
He also warned that the short-term outlook for advertising revenue is not encouraging.
"The management is obviously going to squeeze the assets for the benefit of the creditors," he said. "We have to see in due course whether this damages the longer-term strengths of the titles."