Snarls in labor talks with key unions at papers

On the eve of an important court hearing here Thursday, new labor problems arose at The Inquirer and Philadelphia Daily News that threatened their smooth emergence from a 20-month bankruptcy.

The prospective new owners of the media company said the union that represents the 306 employees who bundle the papers for delivery had rejected a new contract, despite having previously voted to ratify a "substantially similar" offer. The situation brought warnings of dire consequences from the new owners, including shutdown of the papers.

The lawyer for the union, which represents workers called mailers, said the new owners' assertion that his clients had rejected a new contract was "patently false." The attorney, Michael Katz, said there were language issues in the contract that were resolvable. He blamed the new owners for exacerbating the situation, saying they have refused to give the mailers time to address their concerns.

Regardless of which side is at fault, the new owners are in a complicated situation with two unions without contracts. The papers' delivery drivers also have refused to approve a contract with the new owners, who have yet to close on their deal to buy the papers.

Because of the problem with the mailers, "there is now a significant risk of a strike or other job action which would irreparably harm the business," read a statement released by the new owners, a group of financial institutions that purchased the papers' parent company, Philadelphia Newspapers L.L.C., at auction last week.

If that were to happen, the release said, the new owners would be forced "to permanently shut down the business."

Gregory Osberg, president and chief executive officer of the new owners' company, said closing the business was "a possibility, but we are and will explore other alternatives as well."

Brian P. Tierney, who is still the publisher of Philadelphia Newspapers L.L.C. - the company that is in bankruptcy court - said Wednesday night: "This is shocking news to me. If they are sincere that they would shut down the company, it's heartbreaking. I urge them to not follow through on this threat and do all they can to reach a resolution, even if temporary, to protect the community and the jobs."

To emphasize the seriousness of the situation, the new owners asked the current management team to send employees a warning of potential layoffs, which is required by law for companies contemplating significant cutbacks.

Asked why the prospective new owners would consider liquidating the company over a labor dispute when there were other more lucrative options - such as accepting an open offer from local businessman Raymond G. Perelman, Osberg declined comment.

The new owners are to be in court Thursday when Chief Bankruptcy Judge Stephen Raslavich will be asked to confirm a reorganization plan for Philadelphia Newspapers L.L.C., the company that now owns The Inquirer, Daily News, and the website Philly.com.

Philadelphia Newspapers was sold at auction Sept. 23 to the prospective owners for $139 million, including $105 million in cash, the headquarters building on Broad Street, and other incidentals.

It was the second time the new owners, which include debt-holders Angelo, Gordon & Co., Credit Suisse, and Alden Global Capital, had prevailed in an auction for the company.

That bid topped one from a partnership of Perelman, a wealthy Philadelphia businessman and philanthropist, and the Carpenters Union pension fund. The losing bid had a value of about $120 million, including $85 million in cash. That offer remains on the table should PN Purchasers not close on their deal.

No closing date has been set.