Monthly Archives: October 2006

Don't Want to Get Passed Up

What do you do if your core business is imploding not because you are bad at what you do, but because the world has suddenly changed. Ask the Tribune Company, parent of the Chicago Tribune newspaper, the Los Angeles Times, the Chicago Cubs, and part owner of WGN television network and the Food Network cable channel.

Tribune Company’s newspapers are losing circulation and advertising weekly to Craigslist, ESPN and themselves on the web. America’s newspapers have a mass case of Parkinson’s for which there is no current cure. Younger people want their news on the Internet. It’s that simple. The big city newspaper as we know it is dying.

Big city papers like the Trib still make a lot of money, but the future is shrinkage. The stock market hates for that. It worships growth and despises shrinkage. The Tribune Board is now almost forced to sell the papers to a private equity firm, which will milk them to pay debt and fees. The tough decision is whether to keep the other media aspects together as a package or sell off everything and count the money.

The Tribune Company is in a fix like a lot of guys in the screw machine business today. The multi spindle business, high volume, medium accuracy is being dismembered by movement of work to China and India. The trend ebbs and flows, but the long term shift of high volume commercial manufacturing is clearly toward low cost labor markets. As these low cost suppliers hone their skills they will take low volume, high value added work too.

Using the Tribune Company logic, this is the time to sell out of the screw machine business to a smaller private equity investor who will do the eminently logical thing – squeeze it and pay down debt, then flip it to somebody else.

I think that the big city newspaper and the big manufacturing company analogy holds up fairly well. The niche publication, which is not time sensitive, can succeed in the marketplace. And the niche machining company with great expertise and swift response capability will be able to prosper in the American market. Medical, aerospace, military, specialty auto and hundreds of other specialty machining markets hold great promise for well positioned firms. The web will foster numerous export opportunities.

The Tribune is doing the right thing to dish off the papers. They are too big to fix quickly. Huge manufacturing concerns are also correct to shut down fat old factories, but little niche players should have an open field in both publishing and manufacturing in the next several years.

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November

As I am writing, the Congressional elections are an unknown. The conventional wisdom is that the Democrats will win the House and possibly the Senate. Is this a big deal if it happens?

From a legislative standpoint it is a nonevent.

But from a political point of view it is significant. The Republicans have held the House for 12 years. Six years of Bill Clinton and six years of Bush, the political climate in Washington continues to sour. The animosity between the parties is stronger than I can ever remember. This is good and bad.

Legislatively we will have gridlock. This is a wonderful thing for business because usually the best outcome we can hope for in Washington is stalemate. The mantra of doctors and Congress people should always be “do no harm.” If the government can’t get anything done, we are normally sheltered from gross stupidity.

So the Congress will probably become a vitriolic star chamber of investigations of the Bush administration with the Dems attempting to brand George the 43rd as Charles Manson’s twin brother.

But no matter what happens in the 2006 election, 2007 will be an important year for debate about the Iraq war and containment of North Korea and Iran.

The possible presidential candidates will be formulating their war messages next year. Al Gore, Hillary and various unknown governors will be testing their rhetoric on the left wing power brokers in the Democratic party. They will have to appease the La Monsters to get the nomination, but if they go too lefty, they will alienate middle America, which also dislikes an endless war of refereeing between Muslim gangstas in Iraq, but realizes that the U.S. needs a military presence in the Oil loaded desert.

It will be a signal event if the euphemism “War on Terror” finally is renamed by the candidates as the ”War against nihilist Muslim Jihadists.” It will be a long fight, like the Cold War was.

On the Republican side, the 2006 election will also shape the message of the presidential contenders. Senator John McCain appears to really want it. If the Bushies get whomped in the Congressional elections, he will be a logical alternative for the party, but the unalterable fact remains – senators usually lose Presidential elections. You have to go back to 1960 and John Kennedy to a senator who moved directly to the presidency. For this reason I think Rudy Giuliani has a good shot at the nomination despite a lot of health and personal issues which will disappoint the party’s Social conservatives. Whoever gets the GOP nod will position himself or (herself) as the counter-Bush candidate. History may vindicate Bush-Cheney-Rumsfeld’s foreign policy, but 2008 will be too close for happy reminiscences.

If the Democrats take the Senate with 51 seats, it will be extremely difficult for Bush to name a Supreme Court Justice if a vacancy occurs. About the only sure bet to pass a Democrat Senate would be Bill Clinton. Now that would be one way to get him off the campaign circuit in 2008.

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