`Disaster' For Motown Papers?

Having to rehire strikers would be a major defeat

It looked like a clear victory for management in one of the nation's longest-running and most public labor disputes. When some 2,100 strikers walked off the job two years ago at The Detroit News and the Detroit Free Press, the papers' joint owners, Gannett Co. and Knight-Ridder Inc., replaced strikers with permanent new hires and wiped away union work rules. The move was costly: Circulation fell by a third, and losses topped $200 million. But the companies prevailed. They didn't miss a single day of publication and are edging back into the black.

Now, their win may be reversed. In mid-June, a federal labor-law judge ruled that the papers had committed a raft of illegal labor practices, such as unilaterally imposing a new pay scale. In early July, the National Labor Relations Board sought an injunction to require the papers to take back the strikers. On July 31, a Federal District Court in Detroit is scheduled to hold hearings on the injunction--and it's likely to rule against Detroit Newspapers Inc., the company Gannett and KR set up to run the two papers. "Our success rate on injunctions has been about 90% in recent years, including appeals," says NLRB Chairman William B. Gould IV.

The papers say they'll come out on top at the hearing and vow to appeal if they don't. If they lose, "that would be a disaster," says John Morton, head of Morton Research Inc., a Spencerville (Md.) company that tracks the industry. Detroit Newspapers would be forced to either fire replacements or operate at elevated staffing levels, Morton says. Costs would soar either way. Susie Ellwood, Detroit Newspapers' vice-president for marketing, says the papers may have to recall strikers if the injunction is upheld.

Rehiring would undo management's strategy and set back years of efforts to lift the papers' profitability. In 1989, Detroit's two big dailies got Justice Dept. permission to partially merge operations. But readership continued to slide, so Gannett and KR demanded changes in union work rules to cut costs, prompting a walkout on July 13, 1995. Gannett and KR adopted a take-no-prisoners stance. The papers hired new staffers and promised not to dump them if the strikers gave up. Management brought in hundreds of guards and even helicoptered papers out over the heads of picketing strikers. Motor City expressed solidarity with a boycott that slashed circulation by a third. Detroit Newspapers lost $150 million in 1996 and $50 million last year.

SPOILED PLANS. More losses loom if the papers have to recall the strikers, analysts say. In February, the unions declared the strike over and management agreed to rehire strikers. But the company refused to displace the workers it had hired during the strike. Since then, the papers have recalled 200 strikers, says Ellwood. Now the papers might have to bring back 1,091 more, leaving little room for the 1,115 replacements now on the job.

The injunction would ruin the Gannett/KR strategy if it is upheld. The papers had expected to turn a profit this year because new work rules enabled them to publish with some 400 fewer full-time workers. If they are forced to rehire the strikers, management would have twice the staff it needs. So it would almost certainly fire many replacement workers. Even that would be costly. Some replacements would probably sue for damages. Others would probably collect large severance packages. Ellwood declines to estimate the potential cost.

Even if Gannett and KR defeat the injunction, the papers would still face charges of labor-law violations that could again require them to recall strikers--and cough up some $50 million a year in back pay. That case would take years to be resolved. But it means the strike may well wind up costing the papers a lot more than they bargained for.