Will Tribune Become Another Carter-Hawley-Hale?
You'll remember that department store chain, which adopted an ESOP arrangement like Tribune is planning to do, only to see the company go straight down into the tank between 1984 and 1991. The employees lost everything, their stock value, their pensions, everything. Picking up the pieces was, guess who? Sam Zell.
Now, as the Tribune begins the disgraceful step of putting ads on Page 1 of all 10 of its hapless newspapers, that could happen again. Employees should be desperately concerned. In the Carter-Hawley-Hale situation, an incompetent management led by Philip Hawley allowed the company, which had been Southern California's largest retailer, to sink into bankruptcy. The Bank of America, which was also supposed to defend employee stockholder interests, turned out to be defending management's interests instead. Hawley was a member of the Bank of America board of directors.
I'm indebted to Kevin Roderick at LA Observed for displaying yesterday the observations of financial analyst Jim Cramer on The Street.com about the possibility of what Cramer calls "a huge catastrophe" for Tribune employees on the model of Carter-Hawley-Hale.
"You have to feel terrible about what's about to happen to Tribune employees," Cramer states. "I think they're about to lose everything. The whole $34 bid to take the company private depends on them, and on their Aug. 21 vote."
Comparing the situation to Carter-Hawley-Hale, Cramer states, "That was another ESOP takeover, this time with a retailer, done as a defense to takeover, and everybody got wiped out."
Cramer adds, "The astonishing decline in cash flow -- 27% down -- at the Los Angeles Times, just tells you this deal will be a huge catastrophe for a lot of people who can't afford it."
I'm not sure Cramer is right. A retired Times editor told me last week, for example, that he wonders whether Times publisher David Hiller, a Chicago toady referred to above, is giving true figures when he talks about advertising and revenue declines in a recent memo. The motive would obviously be to justify the ads on Page 1, the demise of TV Guide, the end to suburban news, the buyouts and layoffs, all the steps taken by the Tribune Co. to make the Times less than it's been.
But Cramer might be right. The fact is that Zell is buying de facto control of the Tribune with precious little of his own money, that his whole buy-in depends on the employee stock, and that so far, he has shown no clear sign that he has any idea about how to reverse the apparent decline in Tribune Co. fortunes and the quality of its newspapers and other properties. All this has many parallels with the Carter-Hawley-Hale situation, in which a "white knight" also appeared for a time as an agent of rescue, only to rake off the most profitable parts of the company, while allowing other parts to wither.
If he had an idea for rescuing Tribune, even though the deal is not yet complete, Zell should have used his clout already obtained, his seat on the board of directors, to rein in the CEO Dennis FitzSimons and his Los Angeles appointees, Hiller and editor James O'Shea, to prevent them from digging the Tribune hole deeper. I think they should have been dismissed.
Yet since Zell entered the picture, in a choice by the Chicago businessmen who dominate the Tribune board over would-be Los Angeles buyers who would have inspired confidence, either Eli Broad and Ron Burkle, or entertainment magnate David Geffen, the Tribune downward spiral -- if Hiller is to be believed -- on the figures, has only intensified.
I remember Hawley as a pleasant man who unquestionably was loyal to Southern California and believed in Los Angeles, even if he wasn't a competent businessman. By contrast, FitzSimons isn't terribly pleasant, and his animus toward all things Californian is manifest.
To put it mildly, things do not look good.
I wonder, in fact, if the district attorneys of Cook, Los Angeles and other counties where the Tribune papers and television stations operate should not initiate an inquiry to determine whether there have been illegalities in recent Tribune downsizing moves, and whether it would be appropriate to seek court injunctions to halt them.
There's no question that, if they fall flat on their faces, FitzSimons, Hiller, O'Shea, the whole Tribune executive, will get huge severance payments.
But, in case of failure, the employees will be left with nothing.
The situation in Pakistan continues to build toward a world crisis, with that nuclear-armed state now being subjected to the daily suicide bombings that have become a trademark of the wars in Iraq and Afghanistan. The perpetrator: Muslim crazies from Taliban and Al-Qaeda. This has become a daily subject of front-page coverage in the major newspapers, here and in Europe. Today alone, there have been 47 killed.
When one looks back all the way to the 19th century, one realizes that no one has ever been able to establish firm control over the Pakistan-Afghanistan border regions. Can the faltering Musharraf regime?
No matter the difficulties the U.S. has with two wars already. If U.S. military intervention, perhaps with B-52s, is necessary to prevent the terrorists from taking over, and perhaps assuming control of a nuclear arsenal, then it must be undertaken. We really cannot afford to see secular elements in Pakistan lose out, and the country taken over.
Another aspect of the developing situation is that quite a few of the attacks have been directed at Chinese workers in Pakistan. Several have been killed. It isn't only Americans and Israelis who the Muslim fundamentalists hate. It's also Chinese, Russians, Europeans and even other Muslims, thousands of whom have been killed by the terrorists. It could be that help should be solicited from the Chinese in eliminating the Taliban and Al-Qaeda in Pakistan. China, an emerging world power, is certainly solicitous of the interests of its citizens working abroad.
Labels: Tribune failures