Paper Tightens Belt While Buffett Gives Away Billions

By: Joe Strupp As Warren E. Buffett makes history by giving away $31 billion of his fortune to the Bill and Melinda Gates Foundation, his lone daily newspaper is dealing with economic difficulties that have prompted a buyout offer and a switch to only morning delivery.

The Buffalo News, which Buffett's Berkshire Hathaway has owned since 1977, last week announced what Publisher Stanford Lipsey termed a "pension enhancement." He told E&P that it is available to up to 65 employees with at least 25 years of service.

"Like every other paper, we have to reduce expenses," Lipsey said, declining to offer specifics on the paper's profit levels. "We are not losing money, but we are seeing the writing on the wall."

He added that Buffett would not be expected to give any of the money to the News because it involves a charitable donation -- some are speculating it could help cure major diseases -- not a business investment. "There is no connection, he doesn't want to give us the money," Lipsey said. "It is his money, he wants to give it to something to help the underprivileged around the world."

Editor Margaret Sullivan echoed that view when asked about the giveaway at a time when the News is facing economic belt-tightening. "We'd love to have extra billions of dollars, but that is not what his gift is about," she said. "I can't think of any effect this will have on the paper."

John Bonfatti, a vice president for the Buffalo Newspaper Guild, offered a mixed reaction to the Buffett donations, however. "Warren Buffett's philanthropy is a great thing," he said. "Naturally, we hope he remains in a generous spirit when it comes to rewarding the workers here who helped him make his fortune."

Lipsey said buyout eligible employees have 45 days to decide if they will take the pension enhancement. The offer, according to the Guild, would allow any eligible employee who agrees to leave the newspaper to add five years on to his or her age and length of service for pension rate purposes. That would mean those taking the buyout would have their pension's based on an additional five years of service and a five-year higher age. Pensions will be limited to $40,000 per year under the offer.

Bonfatti said the pension is so over-funded, at 162%, the payoffs will not cost much at all. "Considering it is not going to cost them money, it could have been a little more generous," he said. Sullivan said the buyout is limited to three reporters in the newsroom.

In addition, the News will soon switch to full morning production and delivery to help reduce costs and boost circulation. Currently, the paper is published for a single-copy morning edition, with home delivery in the afternoon. About one-sixth of the subscribers began receiving morning delivery in May, Lipsey said, as part of an initial switch that affected Niagara County. The remaining subscribers in Erie County, the majority of circulation, will begin receiving morning delivery in October.

"It was inevitable," he said of the delivery switch that mirrors similar changes at many other former afternoon papers. "We thought it was time. The market has changed from the days [when]Bethlehem and Republic steel [were in business]."