Wednesday, January 02, 2008

BoSacks Speaks Out: Quebecor Financial Fortunes Dwindling

BoSacks Speaks Out: This is an interesting article, discussing Quebecor World's problems, mostly from a local perspective, which is why I liked it, written by a local newspaper reporter. The plant it discusses is the Merced plant, a printing facility that I have visited and printed at.

Perhaps, in this case, I'm stuck in a past era, but it is very hard for me to imagine Quebecor World just disappearing from the publishing scene. I suppose it can happen as the author suggests, but an overnight closure would be devastating to more than the people and families who work at the Merced plant. The ramifications to major and minor publishers would be unprecedented and I doubt that a "here today gone tomorrow" scenario is a possibility.

Admittedly something needs to be done, it could be creative financing, governmental bailout, a few more plant closings, sale of componants, or a combination of all. The molecular details of saving a giant printing corporation falls, just short of my expertise, but an overnight global death seems to me unlikely. More likely will be the slow death of a thousand cuts.

"If death meant just leaving the stage long enough to change costume and come back as a new character...Would you slow down? Or speed up?"

Chuck Palahniuk (American freelance Journalist, Satirist and Novelist. b.1961)

Quebecor financial fortunes dwindling: Web revolution hurting traditional business models
BY Scott Jason

Merced Sun-Star - McClatchy-Tribune Information Services via COMTEX) Quebecor World Inc., one of the largest commercial printers, is spinning its presses at a time when paper is becoming passe.

The multinational corporation -- with a 900-employee plant in Merced -- prints major magazines, such as Newsweek, Time and The Economist, phone books and glossy advertisements.

But in the Digital Age, it's faced with declining demand and rising competition. As the parent company in Canada fends off rumors of bankruptcy, a local Quebecor spokesman insists the Merced plant will keep churning out its contracted printing.

Quebecor World's stock has plummeted from about $15 a share at the beginning of 2007 to $1.79 when Friday's New York Stock Exchange closed. Less than two weeks ago, the company hired its sixth CEO in four years and declared a net loss of $315 million during the third quarter.

Shortly afterward, a plan to sell its European printing division -- touted as the key to financial stability -- soured.

With a C ranking, the lowest possible, from Standard & Poor's stock report this month, some Canadian financial analysts have even speculated that the Quebec-based printing company -- even with more than $6 billion in revenue last year and a former Canadian prime minister as chairman -- may be headed for bankruptcy.

Word circulated earlier this month that the Merced plant, a giant presence in the local economy for decades, might close its doors. (Only Foster Farms, with 3,500 employees, has more private-sector workers in the county.)

Company officials vehemently denied the closure reports, calling the notion "rumor and speculation ... absolutely incorrect."

Company spokesman Tony Ross said the changes at the corporate level haven't had an impact on the Merced plant's operations. He refused to discuss the problems. "I'm not going to get involved in a conversation about the industry," he said. "I choose not to at this particular time."

He wouldn't speculate about whether local employees are concerned about Quebecor's stability. Over the past year, however, the corporation closed three plants in the U.S., two of them in the magazine group.

Such assertions about major factories leaving Merced surface from time to time around Merced and rarely prove true, Economic Development Manager Frank Quintero said.

After hearing the most recent speculation, he e-mailed the company's human resources department, which also debunked it.

Still, companies sometimes do leave the Cooper Avenue industrial park. There's the tombstone from the Unilever plant where spaghetti sauce was made by 124 full-time employees. Nearby, Sierra Beverage remains quiet after being shuttered earlier this year.

Quintero looks at the upside of the vacancies. "We see it as an opportunity: 53 acres to bring in another manufacturer to the community," he explained. "The average Merced resident thinks, 'What's wrong with our economy? What will shut next?'"

As the parent company's new CEO, Jacques Mallette, tries his hand at solving Quebecor World's woes, the impact of the local operation, often referred to as Color Press by longtime locals, is obvious and significant: tax revenue, prestige and jobs.

If the printing presses were to shut down, Merced's unemployment rate would rise by a whole percentage point.

The Cooper Avenue factory maintains a low profile as it hauls in rolls of paper the size of picnic tables, spins them through the multistory printing presses and ships the glossy finished products out to readers across the West Coast.

With the exception of a company spokesman who refused to discuss changes and problems at the corporate level, no company officials local or in Canada returned phone calls during the last week for this article.

Despite the official silence, Quebecor's impact on Merced speaks volumes.

Merced's type of business
World Color Press decided to build a press facility in Merced during the late 1970s, a time when the city, the Chamber of Commerce and other companies were actively searching and courting major manufacturers.

Then-City Manager Allan Schell recalled that the company also considered nearby cities before settling on Merced, possibly because of the easy railroad access. Decades later, railroad tracks were routed into the facility to make deliveries even easier.

Just as now, Merced was looking to improve its budget through sales tax revenue and jobs. It found a winner with the printer. "It was humongous," 77-year-old Schell remembered. "That's a word I don't normally use."

The printing plant began accepting applications during the summer of 1981 for the initial 100 jobs, considered to be high-level and well-paying. More than 650 applied the first day, and 2,500 had returned job applications by the week's end, according to Sun-Star reports at the time.

By September 1981, the plant began printing issues of TV Guide, its major client, and expanded its operation by adding presses over the next two decades.

Because it's within the city's redevelopment area, the company's taxes were pumped into renovating the downtown area to attract more businesses, Schell explained.

The success of the current downtown can be partially attributed to the print shop's presence.

In 1999, Quebecor Printing paid $870 million and merged with World Color Press to become Quebecor World, Inc.

The new company also assumed the $1.3 billion in debt from World Color Press. By then, the Merced plant was up to 800 employees, and a $20 million press was installed that added another 100 positions.

On its Web site, Quebecor asserts that it's the largest printing operation for magazines, catalogues and directories, which are published with the help of 29,000 employees spread across 120 worldwide sites.

Chances are many of the magazines on coffee tables and in doctors' offices across the West Coast were printed in Merced.

Read all over
The Merced plant's presses rarely stop rolling, and the company is focused on making sure every site is meeting its full potential.

A company newsletter from October informs employees that they can pocket a $350 check if the plant exceeds a target of doing 20 percent better than projected. As of August, it reads, the company was 30 percent above its target.

The company is also using the Six Sigma approach to business, pioneered by Motorola, which strives for near-perfection in business processes. Success with the program could mean $7.6 million in savings, according to the newsletter.

The Merced complex's assessed value in 2006 is listed at $151.6 million, said Quintero, the city's economic development manager, adding that more than $63.7 million has been invested in the plant since 2000.

The facility is No. 1 on the city's property tax sheets, bringing in $1.6 million every year that's divided among various agencies.
Quintero estimates that each position at Quebecor has led to a job-and-a-half of new industry. Employees buy homes, groceries and cars, powering the local economy.

Those are all ripple effects of what can't be seen by the drivers who pass by Quebecor's back wall, a view along Santa Fe Drive that only hints at the plant's size.

The presses and office were built on a deep, 500,000-square-foot concrete slab to support the mammoth steel structures. By comparison, the SuperTarget slated for Atwater will be 178,000 square feet.

In an aerial shot of Merced, the white roof of Quebecor's 47-acre complex is easily spotted. No buildings stand out nearly as much.

Inside the building, there's a one-desk reception office with a black printing press on a mantle. Magazines printed by the Merced division flank the antique. Titles include Newsweek, Sports Illustrated, Entertainment Weekly, The Economist and Time. And that's just a sampling.

Corporate changes
Quebecor's online press release archive for 2007 has recently been filled with carefully couched news of reversals, though its spokesman said he can't expand on what's been happening.

In October, the company told shareholders it would pay dividends. Because of regulatory requirements, it suspended payment in late November until mid-2008, when finances could be sorted out.

At the beginning of November, the company announced that it would sell its European printing division to Roto Smeets De Boer for $341 million, which would help reduce its debt and was considered key to its 5-Point Transformation Plan by providing financial flexibility.

That fizzled in mid-December after RSDB's shareholders voted against the deal.

Next, the company decided it would refinance its accounts in November. By the next week, that plan was canceled.

Four days later, CEO Wes Lucas told the company's board that he was leaving to pursue other opportunities after joining the company in May 2006.

Jacques Mallette, chief financial officer and executive vice president, was promoted to fill the vacancy in the Montreal office. It remains to be seen what his first actions will be.

Back in Merced, Quintero monitors Google news alerts for Quebecor and many of Merced's other major players so he can keep up on the latest developments.

While he's aware of what's been happening at the corporate offices, he said his focus is on making sure the Merced plant can be as efficient and profitable as possible. "We can't influence what happens in their headquarters," Quintero explained.

The city is working to install a traffic signal at the corner of Cooper Avenue and Highway 59 because Quebecor employees have complained that the traffic makes getting to work slower.

With many manufacturing industries facing tough times, Quintero said it makes even more sense for city leaders to diversify local business into technology, research and innovation.

Otherwise, "Stop the presses" may mean a headline none of them wants to see.


More bad news for Quebecor World as CEO jumps ship

The Gazette; CanWest News Service contributed to this report
Tuesday, December 18, 2007

Quebecor World CEO Wes Lucas stepped down yesterday after only a year and a half on the job.

Adding to a laundry list of bad news, the chief executive of Quebecor World resigned yesterday, leaving the troubled printer in the hands of its chief financial officer.

CEO Wes Lucas stepped down "to pursue other opportunities," as the company faces a liquidity problem and a near-junk stock battered from months of bad news.

Lucas leaves the top post after only a year and a half on the job.

Mallette, former CEO of folding carton-maker Cascades Boxboard Group Inc., has been with Quebecor since 2003.

Quebecor World also announced yesterday the resignation of Reginald Brack as a director, the second board member to step down in less than one month.

Quebecor World's shares lost 10 per cent of their value yesterday, closing at $1.57.

The stock was worth $15 seven months ago.

Quebecor World has been losing money for the last three quarters, shocking the market with a $315-million (U.S.) net loss in the third quarter

The latest setback saw Quebecor World fail to sell its European operation to Dutch printer RSDB NV for $341 million U.S. RSDB shareholders rejected the offer.

"I saw this coming two years ago," said billionaire money manager Stephen Jarislowsky, whose firm Jarislowsky Fraser Ltd. manages 4.3 million Quebecor World shares.

"If a company has too much debt and expanded too fast, it was bound to go bad, especially in this business, which is a shrinking business," Jarislowsky said.

"People don't like to pay for all the new equipment it needs," he added.

The printing company is now saddled with $2.4 billion U.S. in debt, which the firm has been unable to unload after a $750-million refinancing plan also fell through.

Millions of dollars have been spent to overhaul the commercial printer, which is battling industry trends, including shrinking demand, overcapacity and cutthroat pricing.

Analysts have speculated that Quebecor World will either be privatized by parent company Quebecor Inc. or be sold to one of its competitors.

Possible buyers would be Montreal-based Transcontinental Inc. or Chicago's R. R. Donnelley & Sons Co.

© The Gazette (Montreal) 2007

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