Block Hints At Possible Sale of Toledo, Pittsburgh Papers

By: Joe Strupp As The Blade of Toledo (Ohio) and the Pittsburgh Post-Gazette head into contract negotiations this year, Block Communications, which owns both papers, is hinting that unless the papers find some major savings, they could be sold.

"If we can't operate profitably, there is a good chance we could be sold," said Allan Block, chairman of the board of Block Communications. "It is a business and it has to be a good investment for our shareholders."

He added that a sale of either paper is likely "if it doesn't have EBITDA [earnings before interest, depreciation and amortization], free cash flow, and net income."

When asked if either newspaper was profitable, Block declined to comment. But he said a sale of one or both is more likely today than it was five or 10 years ago. "It is not a fiduciary business to subsidize a company," he said about the newspapers. "We are not going to subsidize operations."

The company just recently announced the closing of the five-person Washington, D.C. bureau that serves both papers and has been in existence since 1927. While one reporter will remain in the nation's capital to cover Capitol Hill, the bureau as it has existed will close.

Block's comments occurred just days after negotiations began with the Toledo Newspaper Guild, according to a notice on the union's Web site. The notice stated that negotiations with management for a new contract began on Feb. 9. The current contract ends March 21.

The union is proposing a three-year deal, with a 6% raise the first year and 4% raises for each of the following two years, according to the notice, which adds that a three-year wage freeze has been in effect at the paper.

Block would not comment on any Blade management proposals, but the guild Web site contends that the paper is seeking a wage cut, increased health benefit costs, and vacation cuts. Block said the guild is one of eight unions at the Toledo paper involved in contract negotiations this year.

In Pittsburgh, all 10 unions have contracts that will end in 2006, but not until Dec. 31, according to guild unit chair Michael Fuoco, a Post-Gazette reporter. He declined to comment on what the union is seeking, noting that no negotiations had taken place and only one preliminary meeting had occurred.

Fuoco said he had heard that the company was already speaking out about a possible sale if profits are not up to expectations. "Obviously, we want the Post-Gazette to survive and we want them to be profitable," he said. "But we can't read their minds."

Block called the current union contracts at both papers "onerous," adding "they are not in line with very much of the rest of the industry. Even compared to other union newspapers we have bad labor agreements that are not acceptable."

In addition to The Blade and Post-Gazette, Block Communications also owns five television stations, two cable systems, a security firm, and other properties across several states.

Although he stopped short of saying the newspapers' possible sale would depend on a new labor agreement that is acceptable, Block said "I believe it is in the interest of all of the parties in Toledo and Pittsburgh to work together or nobody will like the outcome. I certainly hope we don't have to sell the assets of our newspapers."

Block added that if his papers are sold, they will not be the only ones in the coming few years to change owners. "I think we are going to see a lot of newspapers being sold in the next 18 months, and the buyers will be different," he said, adding that investment firms and other non-newspaper owners are likely to come in. "The business model is in transition."