News & Observer to cut 70 jobs

The News & Observer will cut 70 jobs, or about 8 percent of its work force, as part of a reduction in employment announced today by its parent company, McClatchy.

McClatchy, the publisher of 30 daily newspapers, said it will cut about 1,400 jobs nationwide -- or 10 percent of its work force -- as the company contends with declining revenue.

As part of the reductions, 16 full-time and part-time newsroom employees will be affected, John Drescher, the newspaper's executive editor, wrote in e-mail to the newsroom. The remainder of the cuts will take place in advertising, marketing, circulation, production and technical support.

"This is a painful but necessary step," N&O publisher Orage Quarles III said in e-mail to employees this afternoon. "We're operating in a time of great change and challenge for our operations, for the McClatchy Company and for the newspaper industry overall."

McClatchy, which is based in Sacramento, Calif., has been hurt by an advertising slump, particularly in Florida and California where it gets a third of advertising revenue. The company this morning said advertising revenue in May fell almost 17 percent, compared with May 2007.

The job cuts, which will save the company $70 million annually, are part of a broader plan to reduce expenses. McClatchy intends to reduce overall costs by as much as $100 million during the next four quarters. The company will gain additional savings through changes such as reducing the newsprint it consumes.

At The N&O, that effort will include other operational changes. Among them:

-- The Business section will be combined with the City & State section Tuesdays through Saturday. On Mondays, The N&O will add a page of business news. That change will start on Monday, June 30.

-- The newspaper will eliminate some specialized editions, which have resulted in different versions of the daily newspaper for readers in the western Triangle and those in Raleigh. The N&O, beginning Saturday, June 28, will produce only a state edition, for readers outside the Triangle, and a final edition, for those in the region.

-- The newspaper will begin a closer relationship with The Charlotte Observer, also owned by McClatchy. The two newspapers will combine their political, sports and research departments. The features departments also will produce sections jointly.

Without such changes, The N&O would have cut more staff, Drescher wrote.

With the latest round of cuts, The N&O's employment will fall to about 805. Those affected will receive severance and outplacement assistance.

"This is a traumatic day," Drescher said in the e-mail message. "We will be saying goodbye to some colleagues, then embarking upon more change than we've ever seen before."

The N&O has already seen significant changes this year. In April, the company offered voluntary buyouts to about 200 employees to save money. Quarles said 33 people took the package, including six in the newsroom.

The N&O also has closed its Greenville office and decided to leave unfilled several positions vacated by employees who retired or left for new jobs.

All newspaper companies have suffered as advertising migrates online. But the economic slowdown has exacerbated the effect.

Industry-wide, print advertising sales fell a record 14 percent in the first quarter, according to figures released last week by the Newspaper Association of America. And McClatchy has suffered more than some of its peers.

The company purchased larger rival Knight Ridder in June 2006 at the peak of the housing bubble. Shortly after it completed the acquisition, the bubble burst, with some of the biggest troubles in California and Florida. Advertising revenue in those markets declined 23.5 percent and 16.7 percent, respectively, in May.

Because of that transaction, McClatchy is also burdened by about $2.4 billion in debt. Agreements with the banks require that it maintain a specific level of operating income relative to debt. With revenue declining precipitously, it runs the risk of violating that provision.

"The effects of the current national economic downturn ... make it essential that we move faster now to realign our work force and make our operations more efficient," Gary Pruitt, McClatchy's chief executive, said in a statement. "I'm sorry this requires the painful announcement we are making today, but we're taking this action to help ensure a healthy future for our company."