AP Institutes Hiring Freeze, Cites Newspaper Backlash

By: Joe Strupp Associated Press, which has been in a year-long dispute with numerous newspapers over a new rate structure -- prompting a handful to move toward dropping the service -- has instituted a hiring freeze, according to a memo issued Thursday.

The memo, first posted on the Poynter.org Romenesko site, begins as an effort to calm employees potentially worried about the current economic crisis and its potential effect on the news cooperative.

"What is the financial health of AP? AP is on solid financial footing, thanks to modest revenue growth and responsible expense management over the past few years, which have resulted in a positive cash flow," the memo states, adding, "In addition, we are debt free."

But it goes on to cite the current stalemate with newspapers, which has sparked several major and mid-sized dailies, such as The Star Tribune of Minneapolis, to give notice that they will drop the service.

"While newspaper revenue accounts for a lower proportion of AP's total revenue than it has in the past, it still represents 25 percent of our revenue and so remains important to us," the memo says. "We remain financially secure, but our cash flow will be affected and, as a result, we will be cautious with new initiatives while looking for opportunities to economize."

Finally, the unsigned memo lowers the boom: "As the economy falters, it is imperative that we keep spending in line with revenue. Given these economic times, AP, like most companies, is being prudent about hiring and spending. This week, we instituted a company-wide strategic hiring freeze, which we will re-examine regularly. In addition, we are looking at spending on every level. We'll keep you updated with any additional developments."

Here is full "intranet" version sent to E&P.
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--What is the financial health of AP?

AP is on solid financial footing, thanks to modest revenue growth and responsible expense management over the past few years, which have resulted in a positive cash flow. That in turn has allowed us to fund important investments in technology and in our infrastructure, including a new office in Washington and a critical renovation in London. We have also made substantial progress in funding pension plans. In addition, we are debt free.

AP's revenue sources are also diversified, which everyone knows is a critical strategy in difficult financial periods. Nonetheless, these are very challenging times. While newspaper revenue accounts for a lower proportion of AP's total revenue than it has in the past, it still represents 25 percent of our revenue and so remains important to us. With the heavy economic difficulties the media industry is facing, and the new rate structure being rolled out to our newspaper members under Member Choice, we are facing a challenging 2009. We remain financially secure, but our cash flow will be affected and, as a result, we will be cautious with new initiatives while looking for opportunities to economize.

--What is the financial health of AP?s pension plans?

The good news is that direct exposure to the financial institutions that have been in the news lately is minimal in our retirement plans. In addition, AP?s retirement plans are monitored closely by AP?s Investment Management Committee. The committee meets regularly to make sure that all regulatory funding requirements are met. Moreover, investments in both the defined benefit pension plans and defined contribution plans are recommended and monitored by the specialized investment consulting firm, Rocaton Investment Advisors.

Nonetheless, staffers enrolled in retirement programs where employees are directing their investments are encouraged to take a long-term view and a diversified approach to investing. Vanguard, the company that administers the defined contribution plans, is working with us now to make advisory services available to employees. More information will follow about these programs soon.

--What steps is AP taking to address the current financial climate?

As the economy falters, it is imperative that we keep spending in line with revenue. Given these economic times, AP, like most companies, is being prudent about hiring and spending. This week, we instituted a company-wide strategic hiring freeze, which we will re-examine regularly. In addition, we are looking at spending on every level. We?ll keep you updated with any additional developments.