DECLINE OF THE TIMES

By ADAM COHEN

When Mark Willes was an executive at General Mills, he ordered the company's Red Lobster restaurants to stop serving bread to diners because they filled up on it and ordered less food. It was therefore entirely in character when the relentlessly bottom line-oriented Willes, six weeks into his new job as CEO of Times Mirror, announced massive layoffs at the media giant's newspapers. In less than a week, Willes closed down New York Newsday, cutting about 750 jobs, and then announced an additional 1,000 job reductions company-wide, primarily at the flagship Los Angeles Times.

These are excruciating times for the newspaper industry. Newsprint prices have shot up more than 50% in the past year, advertising in much of the country is soft after years of recession, and circulation at many papers is flat or declining. In recent months the Houston Post and the Baltimore Evening Sun have joined the casualties. And a bitter strike against the Detroit Free Press and the Detroit News has opened the possibility that only one of those two papers will survive.

The Times Mirror Co. is having it particularly rough. Its largest paper, the Los Angeles Times, has suffered through the hard economic times and weak advertising climate that have gripped Southern California since the early 1990s. And New York Newsday, one of four major papers in a city that many say can profitably support only two, had been gushing red ink -- as much as $100 million since its founding a decade ago. Times Mirror's profit margin has been 9% to 10%, well below the industry average. And Times Mirror stock has floundered, falling from $53 a share in 1987 to $24 before the Newsday closing.

The new cuts will trim about 700 jobs at the Los Angeles Times, 150 of them editorial, through layoffs, attrition and early retirement. The paper is closing several regional sections. Times Mirror is also giving second thoughts to its effort to enter cable-TV programming. While New York Newsday has stopped publishing, some staff members may be moved to Newsday's flagship paper on Long Island, which has been consistently profitable.

Willes says the downsizing is just prudent management. "Expenses at the L.A. Times are higher than at other newspapers," he explains. "To get our returns back up to a competitive level, we have to get staffing down." But some contend that the Chandler family, which owns controlling shares of Times Mirror, is at fault for taking huge dividends instead of reinvesting in the company. Willes, said one L.A. Times veteran, "is a hit man for the Chandler cousins."

"I just hope that, in these cost-cutting spasms that the stockholders think are important, they put some pressure on Mark Willes not to degrade quality," comments Bryce Nelson, interim chairman of the University of Southern California school of journalism and a former L.A. Times reporter. At New York Newsday, some staff members are bitter because they maintain the paper would have been in the black by next year. "They wanted to do a ritual slaughter for the amusement of Wall Street. They've done it, and the 80 children of the Chandler family made lots of money," says Jim Dwyer, a New York Newsday columnist who was unsuccessful in negotiating an employee buyout.

Wall Street does appear pleased. Times Mirror stock has risen more than 20% since the first layoffs were announced, and more than 50% since Willes was named ceo. "Ultimately, the business of journalism is still a business," notes Doug Arthur, a publishing analyst at Morgan Stanley. "Companies exist to make money and reward shareholders." The question is whether newspapers will be able to reward shareholders and readers at the same time.

--Reported by Dan Cray/Los Angeles and Jenifer Mattos/New York

With reporting by DAN CRAY/LOS ANGELES AND JENIFER MATTOS/NEW YORK