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For others, NASCAR Hall of Fame could be the pits

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Sports – August 2005

For others, NASCAR Hall of Fame could be the pits
By Chris Roush

When R.J. Reynolds Tobacco Co. ended its 33-year sponsorship of NASCAR’s top series in 2003, Will Spencer didn’t wait. The owner of Winston-Salem-based marketing and design company JKS Motorsports asked the cigarette maker, one of his clients, for its racing memorabilia. “Most of the stuff was going to end up in a dumpster or a closet,” he says. “Such a deep-rooted piece of what NASCAR is today came from Winston and R.J. Reynolds.”

Trophies, photos, cars and other NASCAR-related items are part of the Winston Cup Museum, which he opened in May in a refurbished auto dealership. It is the latest of more than a half-dozen museums, halls of fame and team stores in the state that have stock-car-racing displays. Each draws thousands of fans annually.

With NASCAR considering Charlotte as the site of its official hall of fame, however, some wonder how these attractions will fare. “They could easily get lost in the shuffle,” says Larry DeGaris, director of the Center for Sports Sponsorships at James Madison University in Harrisonburg, Va. “But that’s only if the tourism board and NASCAR collectively allow that to happen.”

John Sweeney, who runs the sports-communications program at UNC Chapel Hill, believes that the attractions closest to Charlotte would draw more visitors if the hall of fame were placed there. “But if the hall of fame in Charlotte is all-inclusive, then you’re going to hurt all of the other ones. If it has a Dale Earnhardt wing, that will hurt visitors to his shop.”

Officials involved in Charlotte’s bid downplay any problems. “We believe that it enhances the ‘NASCAR Valley’ concept to come here to spend multiple days, enjoy a race, visit some garages and some of the other amenities,” says Michael Smith, president of Charlotte Center City Partners, a nonprofit that promotes downtown.

Still, with organizers saying the Charlotte site would draw about 400,000 fans its first year, resulting in nearly $7 million in admissions and an economic impact of $62 million, some fans — and their money — likely would be drawn from other sites. Bids were submitted to Daytona Beach, Fla.-based NASCAR at the end of May, with a decision expected by the end of the year. Other cities seeking the hall are Richmond, Va., Atlanta, Kansas City, Kan., and Daytona Beach. The hall could open by 2008.

Each bidding city has pluses. Daytona Beach is home to the sport’s showcase race, the Daytona 500. Kansas City would appeal to the sport’s growing fan base in the Midwest, while Atlanta is home of many NASCAR sponsors. Richmond has two popular races. As for Charlotte, NASCAR’s licensing division is based in the city, and the governing body has another office in nearby Concord. Most NASCAR teams have their headquarters near the Queen City.

Nearby Mooresville is called Race City USA and contains both the North Carolina Auto Racing Hall of Fame and Memory Lane Museum. The hall says it attracts more than 300,000 visitors annually. Also in Mooresville is the Dale Earnhardt Museum, an 8,700-square-foot showroom and store that includes the driver’s seven Winston Cup Series trophies. It is part of the headquarters for Dale Earnhardt Inc., the NASCAR stable of teams Earnhardt started before his death in 2001.

Other team headquarters near Charlotte display cars and operate stores where fans can buy T-shirts, flags and models of race cars. Roush Racing and Chip Ganassi Racing are in Concord, near Lowe’s Motor Speedway. The Roush shop has a car museum. Joe Gibbs Racing is in Huntersville, while Evernham Motorsports is in Statesville. Richard Childress Racing in Welcome has a museum full of cars. Many were driven by Earnhardt.

Petty Enterprises is in Randleman, 90 minutes northeast of Charlotte. Its Richard Petty Museum drew 19,000 fans in 2004, 3,000 more than the year before. Executive Director Doris Gammons is negotiating with the Smithsonian National Museum of American History to display the car Petty drove to his record 200th NASCAR victory in 1984.

Currently on display in the museum are 14 cars raced by Petty and his father, Lee, and more than 300 trophies. Gammons doesn’t believe that having the NASCAR Hall of Fame in Charlotte would hurt business. “We have a lot of Richard Petty stuff where this is the only place you can get it. Fans of Richard will always come here.”

As for the Winston Cup Museum, daily attendance has been as low as 25, though it did attract more than 170 people Memorial Day weekend. But Spencer says he’s not worried about competition from the hall of fame. “We’ll have more things that they’ll want from us than we’ll want from them.”

Of course, all this is assuming the NASCAR hall winds up in Charlotte. Aside from normal competition among cities, there is a major factor working against the Queen City. The decision will be made by NASCAR’s board of directors, which is controlled by the France family — which owns the speedways in Daytona Beach, Kansas City and Richmond.

For customers, he’s dyeing to tie one on

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People – August 2005

For customers, he’s dyeing to tie one on
By Joe Rauch

Erik Chumley will tell you with something approaching pride that he’s never done much of anything in “the rat race.” Such disdain is not surprising from someone whose résumé includes carnival work, horse-trailer assembly and just about anything else to keep the wolf from the door. Chumley, 38, is the owner and operator of The American Tie-Dye Co. in Taylorsville. Customers include Wal-Mart, and his shirts have been featured on the Survivor television show.

The company makes tie-dyed shirts for wholesalers and markets them primarily through a Web site. Sales doubled from about $50,000 in 2003 to more than $100,000 last year, when Chumley sold more than 25,000 shirts.

He and his wife, Dawn, are the only full-time employees. During his busy season, March through May, he hires as many as five temps. “I sell to a lot of schools and youth organizations, sports teams.” An average order is 250 shirts.

Early on, Chumley dyed shirts in his kitchen sink. Now shirts are dyed in and shipped from a 3,000-square-foot building that he leases. “The orders just kept getting bigger. Beginning of last year, we got a huge order — 2,400 shirts — and they needed them in 10 days. Man, we jumped to supersonic speed overnight.”

A plain white T-shirt is bound and folded before specific areas of the shirt are hand-sprayed with dye to create a design. The dye must set for 24 hours. Chumley’s most basic shirt costs $5 wholesale, with a minimum order of two dozen. “The more basic designs, I can train our temporary workers to produce those at a pretty good rate — usually a couple hundred or so a day. The toughest ones, though, only I can do them and usually only about 20 a day. And that’s pushing it.”

Tie-dye became popular in the 1960s and remains the signature couture of neohippies. But some of Chumley’s customers have a larger corporate design in mind. Wal-Mart wanted its shareholder-assistance team to stand out at an annual meeting. Survivor decided to merchandise replicas of a tie-dyed shirt made by Chumley and worn by popular contestant Rupert Boneham.

Chumley’s route to the garment industry was circuitous. A native of Hillsboro, Ill., he dropped out of high school at 18, got his GED two weeks later and joined the Army at 19. Discharged 11 months later for alcohol abuse, he settled in Arkansas, stopped drinking and took jobs that included finishing horse trailers, selling lemonade and running games at carnivals. In 1993, he was attending the University of Central Arkansas in Conway when a friend asked for help tie-dyeing shirts for an upcoming festival. Chumley got a fast course in the basics. For the next decade, he alternated selling tie-dye at flea markets and roadsides with carnival work and other jobs.

In 1996, he came to Taylorsville with a carnival. “My third day here, I met a girl. Eighteen days later, we were married, and I settled in here.” He and his wife dyed shirts part-time until setting up the wholesale business in 2003. He wants to open a store to sell his most elaborately designed shirts. “We think they’ll be more successful at retail, and that’s the opportunity for all of us in the shop to be creative — which is why we got into this to begin with.”

Consistency

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Up Front: August 2005

Consistency

For the third year in a row, a story by Senior Editor Ed Martin won the gold prize for best magazine feature in the Alliance (formerly Association) of Area Business Publications Editorial Excellence Awards — the fifth time in six years a writer for this magazine has claimed top prize in that category. Pieces by Contributing Editor Irwin Speizer won it in 2000 and 2001.

Here’s what the judges, members of the University of Missouri journalism faculty, had to say about Ed’s cover story on executive gambling (November 2004), which brought home the gold this year. “A story about running a business into the ground as the result of a gambling addiction is the type of creative idea that’s bound to attract reader attention. Using strong imagery that describes lives in free fall, the author captures the tragedy of a recreational diversion that slowly turns into a compulsion.

“This feature reads like a psychological thriller combined with solid business journalism as it narrates the implications of management that’s too willing to roll the dice.”

This was the second year in a row we captured the top prize for best headlines in the open category for newspapers and magazines. “These heads attract attention with their nice word play, but they also match the tone of the story without sensationalizing. This headline portfolio offers a nice variety of approaches. Notable: In a story about State Auditor Ralph Campbell’s effort to root out misuse of state property, the headline says, ‘State gets taste of Campbell’s snoops.’”

And it was the third consecutive year we’ve taken the bronze award for best regional business magazine: “Business North Carolina contains some of the best writing in the category, from profiles of a black college president to issue stories on timber companies, a Merck vaccine plant and an NBA team. The stories are packaged in a straight-forward manner that’s clean and simple and accessible to any reader.”

Ed’s cover story on Raleigh lawyer Wade Smith (January 2004) won the silver prize for best magazine profile. (He won gold prizes in the category in 2002 and 2003.) “Martin accomplishes what any good profile should aspire to do: show, rather than tell, how personality can directly influence someone’s professional success or failure. He doesn’t let Wade Smith’s reputation get the best of him, choosing to frame the story around a case that Smith lost. Martin makes good use of the tension between Smith and his brother, which reveals much about how Smith’s values were shaped and how they motivate him.”

After winning the gold award for best body of work by a magazine reporter three years running, Ed got the bronze prize this year. (As I told him, if he had snatched the top prize again, they would have had to retire it — writers on other magazines would’ve cut their throats or at least taken to their beds and pulled the covers over their heads.) “Edward Martin leaves no stone unturned in his comprehensive, in-depth stories on CEOs addicted to gambling, the impact of the gaming industry on the Eastern Band of Cherokees, medical malpractice and Honda’s new little jet.”

The competition attracted a record 689 entries from 60 publications. The alliance represents independent regional business magazines and newspapers in the U.S., Canada, Australia and Mexico.

 

Banks on it

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Banks on it

Five more break into our annual ranking of Tar Heel public companies, which is headed by two of their bigger brethren.
By Chris Roush and Dail Willis

Collectively, the state’s largest public companies didn’t have an awesome year, but it was better than a poke in the eye. Business North Carolina’s Top 75, which ranks public companies based in the state by their market capitalization on June 30, shows growth that was promising, if not spectacular, by several measures.

The market cap required to make the list increased 24%, but the median market value increased only 5%. “We have seen modest economic growth over the past year in North Carolina,” says Mark Vitner, senior economist for Wachovia.

The financial-services industry, already well represented, added a few members. Bank of America and Wachovia topped the list, as they did last year, BB&T ranks fifth, and five of the eight newcomers are banks.

The biggest newcomer, however, isn’t a bank. FairPoint Communications makes its debut at No. 38. Incorporated in 1991, it went public Feb. 4, netting $435 million in its initial public offering. At the end of June, its stock traded at $16.15 a share.

The other new public company didn’t fare as well. Icagen, a drug developer, netted $37 million in its IPO on Feb. 3 — the first by a Tar Heel company since 2002 . Its shares traded at $7.85 — less than its IPO price — at the end of June, and it landed at No. 57 on the Top 75.

The market cap needed to make the Top 75 might have been even larger if some big companies hadn’t been sold. Wilmington, Mass.-based Charles River Laboratories International bought Cary-based drug researcher Inveresk Research Group. Camden Property Trust, a Houston real-estate investment trust, bought Charlotte-based Summit Properties. New Brunswick, N.J.-based Johnson & Johnson bought Raleigh-based Closure Medical. Danville, Va.-based DIMON bought Wilson-based tobacco and wool trader Standard Commercial.

Two longtime Top 75 companies dropped from the ranking for other reasons. Wilmington-based drug researcher aaiPharma is in Chapter 11 bankruptcy. Greensboro-based Culp, like many of its fellow textile makers, is restructuring.

 

Top 10 Public Companies

 

The following chart is an exerpt from the complete chart in the August 2005 issue listing market values, price and earnings and revenue.

05

04

Ranked by 6/30/05
market value

Industry

6/30/05
market value (millions)

Change from 6/30/04

6/30/05 stock price

Change from 6/30/04

Latest fiscal
year revenue (millions)
Change from
year before

01

01

Bank of America
(N-BAC)
Charlotte

Banking

$183,423.8

7.1%
$45.61
7.8%
$65,447.0
33.7%

02

02

Wachovia
(N-WB)
Charlotte
Banking 78,190.9
35.0
49.60
11.5
28,067.0
14.7

03

03

Lowes
(N-LOW)
Mooresville
Hardware stores 44,973.1
7.8
58.22
10.8
36,464.0
18.2

04

05

Duke Energy
(N-DUK)
Charlotte
Energy 27,551.2
49.7
29.73
46.5
22,503.0
1.9
05

04

BB&T
(N-BBT)
Winston-Salem
Banking 21,837.7
6.4
39.97
8.1
6,666.0
6.8
06

09

Reynolds American
(N-RAI)
Winston-Salem
Tobacco 11,613.6
103.3
78.80
16.6
6,437.0
22.2
07

06

Progress Energy
(N-PGN)
Raleigh
Energy 11,250.3
4.7
45.24
2.7
9,772.0
11.8
08

08

Nucor
(N-NUE)
Steel 7,308.1
23.9
45.62
18.9
11,376.8
81.6
09

07

Jefferson-Pilot
(N-JP)
Greensboro
Insurance 6,854.0
(2.4)
50.42
(0.7)
4,102.0
14.8

10

10

Laboratory Corp. of America
(N-LH)
Burlington
Lab testing 6,717.3
19.5
49.90
25.7
3,084.8
5.0

 

Anchor away

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Anchor away

Maureen O’Boyle left Charlotte to find national fame. Now she’s glad to be doing the news in her hometown.

Gone are the 8 million viewers and a staff of nearly 200. The audience is a fraction as large and the staff, not a drop in the bucket. Instead of New York and Los Angeles, where she once worked, she’s based in Charlotte, where she was born. Maureen O’Boyle, late of tabloid-television shows Extra and A Current Affair, has come home. With no regrets. “When you are sitting down and communicating information on television, you’re thinking about talking with one person,” says O’Boyle, 41, now an anchorwoman at WBTV. “So there’s actually no difference.” Except the pay, which she won’t discuss.

One of nine children, she graduated from West Charlotte High School in 1981, then attended East Carolina University. A director at the nearby Washington TV station heard her on the campus radio station and offered her a job. She was 18 and, she says, lousy. “I had to go to work at 3 a.m., and I lived in a loud dorm. Some of the girls were just going to bed. It was scary, driving 15 miles along country roads in the middle of the night.” She lost that job in the spring of 1982.

In 1986, she went to work in Spokane, Wash. She was 22. Two years later, she was in New York on A Current Affair. When Maury Povich left to start his talk show in 1991, she stepped in as anchor. In 1995, she became anchor and host of Los Angeles-based Extra.

But behind the cameras of tabloid television, whose often lurid fare included recreations of real-life events, she was increasingly unhappy. “There were things I really didn’t like. I loathed them might be a better word.” She struggled with bureaucracy. “To get one answer, you had to go through six people.” On a 30-minute show, she’d introduce five to seven three-minute reports. “I was on only for little snippets, but everything was more under the microscope.”

She quit in 2000 to raise her daughter, Keegan, in upstate New York, where she owned a cabin. Last October, they moved to Charlotte. Now, days begin at 6. By 9, she has read the morning newspaper and gone online to review potential stories. At the station, a producer writes a skeleton script for her noon slot. At 11:30, she does a live promo for the news. Minutes tick down. She settles into the anchor desk. “I’m Maureen O’Boyle … ”

By midafternoon, she is going over scripts for the 5 and 6 p.m. news. “Producers walk us through what all the reporters are doing.” Rarely does she do any reporting. “I’m getting ready for the 5 o’clock news, and on average, in the ‘A’ block alone — there’re a total of ‘A’ through ‘H’ blocks in just the 5-to-6 news — we’ll have upwards of 12 stories.”

There’s pressure. WBTV once ruled the market. Now it runs second to rival WSOC. she co-anchors noon, 5 and 6 p.m. shows. “It may seem mundane on a given day with no breaking news. But most days there is.” The challenge is getting it all on the air.

Homecomings are often bittersweet, and hers was no exception. Still in college, O’Boyle was encouraged by a family friend to pursue her TV career. Loonis McGlohon, WBTV music director, suggested she come back to Charlotte when she had more experience. By 2004, she had it. He died in 2002.

Ports chief harbors hope for expansion

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People – July 2005

Ports chief harbors hope for expansion
By Joe Rauch

Given the choice, Tom Eagar would probably prefer to be elbow-deep in an engine block of one of the Corvettes — six, so far — that he restores. “My cars have won a few show awards, but the reward really is in the process, not any payment at the end.” Good thing, then, that he keeps his day job as chief executive of the N.C. State Ports Authority.

Bringing three decades of shipping experience, Eagar, 63, came to work for the Ports Authority as deputy executive director of operations in 2000. In March 2004, he became interim CEO after Erik Stromberg resigned at the request of the board of directors. Last August, the $150,000-a-year position became permanent.

His first job on the docks was behind the steering wheel of a delivery truck. After graduating from high school, he spent four years working in garages around his hometown of Torrance, Calif. Drafted into the Army in 1964, he spent two years as an infantryman and truck driver, including a tour in Vietnam. “It was then I resolved that I was going back to school.”

He graduated from California State University in Long Beach in 1970 with a bachelor’s in business administration. The G.I. Bill and driving a truck paid for college. “I was doing a lot of deliveries and work at the Long Beach docks. That’s when I really got interested in the process of the docks.”

After graduation, he took a job in Long Beach working for Elizabeth, N.J.-based Sea-Land Service, then a fledgling container shipper. He stayed 23 years, rising to direc-tor of transportation services. He then spent four years as a general manager for transportation at another shipping company, Jacksonville, Fla.-based Crowley American Transport. In 1998, he joined Cincinnati-based Chiquita Brands North America, managing its port and transportation operations. “I got to see things from the perspective of a company that depends on these shipping companies and port facilities to stay in business.”

Those experiences have shaped his expansion plans for North Carolina’s ports, which employ about 4,000 at Wilmington and Morehead City. Why expand? Through April, tonnage was up about 25%, mostly because of a channel-deepening project completed at the Wilmington port in 2004. The authority hopes to add three container-shipping lines in Wilmington within three years. One will start in January.

He takes the long-range view. “If we just sat here in the office and didn’t actively push to make this the best possible port system on the whole East Coast, I wouldn’t feel like I was doing my job. Just like when I’m working on one of my cars — if it isn’t done properly, put together so that it matches the way it was the day it rolled off the assembly line, I’m doing that car a disservice. It’s the process that I find the most important.”

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Pinehurst didn’t putter around with the open

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Sports – July 2005

Pinehurst didn’t putter around with the Open
By Chris Roush

Hiring thousands of employees. Negotiating hundreds of supply contracts. Finding business partners. Millions of dollars in local economic impact that depend on your performance. Typical worries of a business executive? Sure. Then how about shutting down within a week of opening, by design? That’s what’s different about Reg Jones and Beth Kocher’s most recent venture.

It’s called the 2005 U.S. Open Championship, held in June on Pinehurst Resort’s No. 2 course. Jones, the Pinehurst vice president who is director of the Open, and Kocher, the resort’s executive vice president and chair of the tournament’s executive committee, started planning five years ago. Now that the tournament is over, all that work is being dismantled. By early August, a multimillion-dollar operation supporting more than 380,000 customers will no longer exist. Volunteers will have gone. Companies will have folded their hospitality tents. All that will be left is the money made by Pinehurst’s owner, Dallas-based ClubCorp, and Sandhills businesses.

A month before the event, no one was predicting how this year’s tournament would stack up financially against 1999, the last time Pinehurst hosted the Open. ClubCorp made $10 million then but would not project its earnings this year. The local convention and visitors bureau forecast $70 million in direct spending this year and an overall economic impact of $128 million —lower than its estimate of a $160 million impact in 1999. CVB President Caleb Miles says the numbers aren’t comparable because the earlier estimate was based on the impact at other U.S. Open sites. The 2005 projection — which also lags Pinehurst’s forecast of $153 million — is based on information gathered in 1999.

There was reason to believe in the months before the tournament that spending could fall short of the 1999 level. “That’s because of what corporations are spending,” Miles says. “We’re not seeing the spending we saw back in the late ’90s.”

Don’t blame Jones and Kocher, both of whom worked on the 1999 tournament. Jones was director of operations then, handling transportation for fans and other logistics, while Kocher was in a job similar to the one she holds now. They took what they learned then and used it this year. They also visited the sites of the last five Opens.

“Every year, you find a better way to do something,” Jones says. Among the changes based on their trips were lengthening the course by nearly 100 yards and adding space to the merchandise tent, making it 60 feet longer than the one at Shinnecock Hills, N.Y., site of last year’s Open. They also negotiated a contract with the United States Golf Association that’s better on at least two fronts: Pinehurst could sell about 8,000 more tickets for each round at $85 each, up from $65 in 1999.

When planning began in 2000, Jones and Kocher faced another issue — the economy and its impact on selling corporate-hospitality tents. For the ’99 Open, Pinehurst sold 50 tents at $125,000 each, generating $6.3 million. They worried that they would have trouble selling as many for ’05 because of the economic downturn and its effect on North Carolina businesses, particularly high-tech and textile companies. “Selling in mid-2002 and the fall of 2002 was pretty rough,” Kocher says.

So they turned to Jim Hyler, chief operating officer of Raleigh-based First Citizens Bancshares. Hyler, Jones and Pinehurst Director of Client Services Ricki Lasky visited executives around the state and encouraged them to buy hospitality tents.

By October, Pinehurst had sold all 65 spaces. Prices ranged from $40,000 to $175,000. Among companies that bought space in 1999 and came back were Bank of America, Belk, Charlotte Pipe and Foundry, Duke Energy and Progress Energy. Newcomers included BB&T, Golden Corral, Quintiles Transnational and Red Hat. Officials would not say how much revenue was generated. The companies wined and dined clients and potential customers in air-conditioned tents with carpet, white tablecloths and entrees that included barbecued salmon.

In September 2003, Pinehurst began accepting applications for the 5,400 volunteers needed to run the event. By December 2004, every position from airport greeter to scoreboard operator had been filled. In May, volunteers picked up their uniforms and began training.

Along the way, Jones negotiated contracts for everything needed to run the Open. Progress Energy laid power lines for eight megawatts of electricity, enough to power 3,200 homes for a year, and Sprint installed miles of telephone wire around the course. While all that was going on, Pinehurst still had to accommodate guests who wanted to play golf.

And, just like that, it was over. The pros packed their bags and headed to the next tournament. But work for Jones and Kocher was not done.

“The teardown is probably the worst point,” Jones says. “Most everybody leaves, and then our vendors and staff have to clean it up.” While it takes three months to install the bleachers and other equipment, they can be removed in half that time.

But the work is never really over. Pinehurst has more tournaments to run. In 2007, it will manage the U.S. Women’s Open for Pine Needles Lodge and Golf Club in Southern Pines. The next year, Pinehurst hosts the U.S. Amateur. Logistical meetings have already been held for those events. “There is no down time,” Kocher says. “They keep us a little busy.”

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Paper cuts

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Paper cuts

As about 80 employees — and the new owner — of the Durham Herald-Sun learned, they can be painful.
By Tim Gray

We didn’t fire everybody,” Bob Ashley, the executive editor of The Herald-Sun, says with a nervous chuckle. “They’re out on assignment.” The newsroom of Durham’s daily newspaper is nearly empty. Fluorescent lights give a sickly green cast to the warren of paper-strewn desks. Blinds are drawn, sealing out time of day and turn of season.

Like beehives, newsrooms tend to be utilitarian spaces animated by their occupants — buzzing when filled with caffeine-stoked reporters, still after deadline. But the emptiness here seems grim. Seventeen — one in five — of this newsroom’s occupants were let go the first week of January. Over-all, a slightly larger percentage — about 80 of 351 employees — lost their jobs.

The cuts began Jan. 3, the day Paducah, Ky.-based Paxton Media Group Inc. closed its purchase of The Herald-Sun, which had been locally owned for more than a century. They proceeded with callous dispatch. Axed staff were forbidden to gather their belongings and escorted to their cars. One top executive was ordered to stop writing an e-mail to his boss. It didn’t matter — Paxton already had canned the publisher.

The sale and firings generated media coverage out of proportion to their economic impact. The region’s dominant newspaper, The News & Observer in Raleigh, and the alternative Independent Weekly in Durham larded their pages with stories, publishing more than a dozen during the next several weeks. A TV station posted a truck and reporter across the street Jan. 3 to broadcast live reports.

Why so much attention for such a small layoff? After all, the state’s manufacturers have bled tens of thousands of jobs the past decade. Vanity likely contributed, with reporters and editors assuming everybody thought the loss of journalism jobs as tragic as they did. So did self-interest: touting a competitor’s travails. Plus, it probably scared them a bit, driving home the point that a college degree and clean fingernails no longer provide job security. As the state’s textile, furniture and tobacco workers know — and their downsized white-collar brethren have learned — jobs are only as secure as the next profit-and-loss statement.

Now Ashley and his boss, new publisher Bob Childress, will be the ones looking over their shoulders. Many Herald-Sun survivors say they distrust Paxton. And the competition — especially the fourfold-bigger N&O — smells blood. The Herald-Sun, with a weekday circulation of more than 50,000, is the largest of the 29 newspapers Paxton owns, and the company paid a hefty price — an estimated $110 million to $120 million — for it. But the paper, like most U.S. newspapers, has been losing circulation much of the last decade. Paducah is watching.

Ashley and Childress, seated in the publisher’s roomy corner office, have just spent an hour explaining why The Herald-Sun couldn’t have survived without the layoffs. “The paper was losing money and was heavily overstaffed,” Childress says. “Equipment was outdated — there was software that couldn’t be used because the computers were so old they wouldn’t accept updates. The pension plan was behind in its funding.”

Childress, 64, is tall and thick-bodied, an ink-stained Buford T. Justice, the wisecracking sheriff played by Jackie Gleason in the Smokey and the Bandit movies. He crosses his arms over his belly, leans back in his chair and squints skeptically at his questioner. When off the record, he relaxes, talks frankly and cusses cheerfully. Despite his age, he doesn’t plan to retire for at least five years.

A Durham native who once delivered the afternoon Durham Sun, which merged with The Durham Morning Herald in 1991, he has been a corporate nomad for 38 years, working for a variety of newspapers, mostly in Virginia and Tennessee. The Durham where he grew up — an industrial city where tobacco was king — is gone. Back then, the Research Triangle Park was a pipe dream in a pine forest.

Ashley, who turns 57 this month, grew up in Mount Airy and graduated from Duke University in 1970. He worked at The Raleigh Times, now merged with the N&O, and The Charlotte Observer before editing a Pennsylvania paper. He joined Paxton when it bought the paper he was editing in Owensboro, Ky. When Paxton asked Childress, the Owensboro paper’s publisher, to run The Herald-Sun, he brought Ashley along.

Short and slim, Ashley exhibits the genial dweebishness common among many editors. But he’s as flinty as Childress about the layoffs. “We were able to preserve the bulk of the people on the street reporting and writing local news. Our primary concern was protecting that, even at the cost of making reductions that didn’t win us any favor with some of the more vocal aspects of the public.”

But the real question, some say, isn’t whether Paxton had to hatchet staff but how the company chose to do it. Several carloads of Paxton personnel showed up that Monday morning. “We’d gathered in the boardroom to welcome them with a big Herald-Sun hug,” recalls Toby Barfield, who was vice president of sales and marketing. Herald-Sun managers had last seen Paxton’s executives shortly before Christmas, when they had toasted the paper’s future at a laughter-filled lunch at the University Club.

Jay Frizzo, the new owner’s chief operating officer, told the managers to return to their offices — he and another Paxton executive would meet with them individually. He started with David Hughey, the publisher, who had been with the paper 30 years. Within 10 minutes, a Paxton staffer was escorting him to his car. Next came Barfield.

“I was typing an e-mail to Dave and the other officers about the great December we’d had,” he recalls. “Revenue was up 20% over December 2003. I’d written it was a great present for welcoming the Paxton people.” Frizzo entered his office and sat down. “There’s no easy way to say this,” Barfield, who had worked for the paper more than a decade, remembers him saying. “We don’t have a place for you in our organization. Your position has been eliminated, and we need you to leave the building.”

“Can I finish this e-mail I’m writing to Dave?” Barfield asked. “You don’t understand,” Frizzo replied. “We need you to leave right now. Don’t touch the computer. Don’t touch the phone.” “Can I at least gather my stuff?” “No, we’ll box it up and have it sent to you.” Barfield was led from the building. His escort — a man he had never met — ushered him in silence down the back stairs. “I figured he would stop at the back door, but he walked all the way to my car, stood there and waited until I drove away.”

Chief Financial Officer Jim Alexander and Executive Editor Bill Hawkins soon followed. Alexander pulled his car off the road a block from The Herald-Sun, which sits on a side road near a busy shopping center. He was stunned. He and other managers had known Paxton might not want to keep them; they had talked among themselves about it. “But they never gave us any indication that, 30 minutes after the closing of the deal, we’d be in the parking lot.”

Laura Hanf, a principal in the Charlotte office of human-relations consultant Findley Davies, knows why the dismissals attracted so much attention. “It’s usually not done that way unless you feel there’s a real risk of sabotage or you’re firing the person because of real issues.” Executives, she says, usually are offered a chance to resign or retire.

“We did it the way most companies do it now,” Childress contends, “and the way our lawyers told us to do it. We had to consider employee safety. If you have 40 to 50 people leaving the building in one day and if just one of them goes off the deep end, you’ve created a horrible situation for the rest.” Another reason, he says, was computer security: It would be easy to delete files.

The uproar puzzles Paxton executives. After all, those they let go got severance packages based on tenure. Some media observers speculate they were taken by surprise: Paxton is used to smaller towns where the paper — which it owns — controls most local coverage. Frizzo did not respond to requests for comment. Another company official, speaking on condition of anonymity, says Paxton executives believe they’ve been burned by what has appeared in print. That has to bring a smile to the faces of all those people who don’t run newspapers who feel they’ve been treated unfairly by the press.

Escorted out the door, Hawkins hailed Rick Bean, publisher of the High Point Enterprise, another Paxton executive brought in to help with the firings. “Rick, the sad truth is that the N&O is going to eat your lunch in Durham,” said Hawkins, now executive editor of the Charleston, S.C., Post & Courier. Childress and Ashley arrived that afternoon. By then, four newsroom staff members were gone. The rest, Ashley says, were “inquisitive and edgy. I told them we were going to move as quickly as we could on the issue of further cuts.” By the end of the week, it was over.

Soon, the N&O was showing signs that Hawkins’ prediction might come true. The next day, the paper ran a story about the layoffs on the front of its business section. Two days later, columnist Ruth Sheehan weighed in. Less than two weeks after that, the paper revisited the layoffs with an analysis of the reaction in Durham. In early February, it followed up with a story on Paxton’s continued appetite for acquisitions.

The N&O has tried with middling success to lure Durham readers since the early ’90s, when it opened a large bureau in the city. Though it has picked up about 9,000 subscribers in Durham County over the last decade, it has failed to become the city’s dominant paper. In the wake of the sale and layoffs, the N&O is again ramping up efforts. It hired former Herald-Sun staff members, including columnist Jim Wise, and poached at least one editor who wasn’t laid off. In March, it introduced a weekly newspaper called The Durham News, delivered free to about 70,000 households. N&O Publisher Orage Quarles says the timing was a coincidence — an improving economy, not changes at The Herald-Sun, spurred it. “We’ve been planning this Durham product for several years, and the reason we didn’t launch it earlier was the economy was so soft,” he says.

The Independent Weekly hounded The Herald-Sun with nearly as much vigor. In a lengthy story on the sale, it concluded that Paxton might have paid twice what the paper was worth, pegging the price at $125 million. The broker who handled the sale, Owen Van Essen of Dirks, Van Essen & Murray in Santa Fe, N.M., says it was less than $120 million.

Whether Paxton paid too much is debatable. The supply of newspapers like The Herald-Sun — independently owned, reasonably big and in a growing market — is limited, says Robert J. Broadwater, an investment banker specializing in newspapers at Veronis Suhler Stevenson, a New York brokerage. “You effectively can’t start a daily newspaper. You’ve got to buy one.” Nine media companies looked seriously at the paper, says an executive involved in the sale, and five bid on it. They weren’t naïve dabblers but experienced acquirers — including the N&O’s parent, The McClatchy Co., based in Sacramento, Calif.

Why, then, the firings? That’s what usually happens, through layoffs or attrition, when a big company with many units buys a stand-alone operation. Broadwater says the Rollins family, which had owned the paper since 1895, might have maintained a big staff to hold down current income, letting them defer taxes until they sold the paper. The family hasn’t spoken publicly, but current and former Herald-Sun managers have, with public discussion devolving into a cockfight over whether the paper was mismanaged. Childress insists it was. But beyond a key point or two, the arguments differ mainly in emphasis.

Both sides agree it had more staff than average for its size. But the former managers argue that the complexity of the Triangle market and the challenge from the N&O required a bigger staff. “Paxton has a staffing formula that doesn’t work in this market,” says Jon Ham, who headed digital publishing and now works for the John Locke Foundation in Raleigh. “They’ve got a monopoly-market approach.” The Herald-Sun competes with the N&O not only in Durham but in Chapel Hill, where it distributes its Chapel Hill Herald supplement. “The Chapel Hill Herald made us overstaffed by industry standards, but the competitive situation was unique.”

Prior management saw The Herald-Sun as a regional paper, believing that the Triangle’s affluent, educated readers wanted at least a taste of national and international news. Under Childress and Ashley, the paper will reflect the creed that, like politics, all news is local. “The New York Times and The Wall Street Journal are available in paper form and widely read here,” Ashley says. “And anybody can sit at their computer and read 15 top national newspapers. Our theory is, why are they going to turn to us for that?”

For the new regime, local means Durham, Orange, Chatham, Person and Granville counties. They’ll leave Wake County to the N&O. “The N&O is a Raleigh newspaper that does a great job,” Childress says. “We’re a Durham newspaper that does a great job. I don’t intend to go to Raleigh. What they choose to do is their business decision. But I’m not going to compete with them in the way this newspaper has seemed to in the past.”

Ashley and Childress are betting that Durham residents care more about the PTA than the pope and that Triangle cities are still as different and divided as they were when Childress was growing up. So far, the paper is doing well, according to the anonymous company official.

For their sakes, it had better. If what has happened proves anything, it’s that Paxton won’t give much warning if it wants to make a change.

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Low-price Wal-Mart says pay is too high

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Tar Heel Tattler – July 2005

Low-price Wal-Mart says pay is too high
By Frank Maley

A penny saved is a penny earned. And even at a $285 billion business such as Bentonville, Ark.-based Wal-Mart Stores, pennies add up. The retail giant, whose approximately 47,000 Tar Heel workers make it the state’s largest for-profit employer, revised its pay plan in June 2004 to ensure consistency in store wages while allowing for regional differences in cost of living. “The idea was to level the playing field for all associates,” spokesman Marty Heires says.

It kept labor costs in check, too. When the plan was revised, the company told BusinessWeek its average hourly wage for store employees was $9.64. It’s now $9.68. The plan boosted the pay of some employees, but others have seen their pay cut. In March, for example, about 70 of approximately 250 employees at a Wal-Mart store in south Raleigh had their wages trimmed — some by $1 or more an hour. The company’s average hourly wage in North Carolina is $9.85.

Their pay was cut, Heires says, because they were being overpaid. When they were hired earlier this year, the pay plan’s criteria hadn’t been applied correctly. The error was discovered during a quarterly payroll audit. “They were paid more than people doing comparable work,” Heires says. “So they were dollars ahead on the deal.”

Maybe so, but competitors could use the cuts to their advantage. “I would look at whatever stores are not too far away from Wal-Mart and expect to see them running ads: ‘We treat our employees fairly. Come on over here and get a better job,’” says James F. Smith, a finance professor and economist at UNC Chapel Hill’s Kenan-Flagler Business School. “Unless a company is about to go broke, it’s very difficult to think of how you make palatable the notion that, ‘Hey, for doing the same work tomorrow that you’re doing today, I’m going to pay you X percent less.’”

If companies find out employees make more than they’re supposed to, managers often reclassify them into jobs worth the wage or freeze their pay until their peers catch up, Smith says. Cutting pay might rein in labor costs, but it demoralizes employees and boosts turnover and training costs. “At best, it’s penny-wise and pound-foolish.”

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How you gonna keep ’em down on the farm

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Economic Outlook – July 2005

How you gonna keep ’em down on the farm

Republican Steve Troxler won a close election for state agriculture commissioner in November that was disputed because a broken voting machine failed to record 4,400 votes. On Feb. 4, Democratic incumbent Britt Cobb conceded. Troxler has a bachelor’s in conservation from N.C. State University and owns Troxler Farms, growing tobacco and wheat in Guilford County. He recently revealed his plan for agribusiness in North Carolina.

BNC: What’s the purpose?

Troxler: We were directed by the legislature to prepare this plan. The emphasis is not only on the preservation of farmland but on the preservation of farming as a business in North Carolina. When you’re talking about agribusiness being $60 billion a year — probably three times as big as the next-largest industry — and, directly and indirectly, employing 20% of the population, this needs to be a big focus.

What’s different about your plan?

We want to give the farmer the flexibility to stay in business. To give you a general idea of what’s happening in North Carolina: Since 1997, the number of farms has fallen from 59,000 to 53,000. And we’ve lost about 300,000 acres of prime farmland in that time. But maybe even of more consequence is the average age of a North Carolina farmer in 2002 was over 56 years old. If you take all of these factors and put them together, I think you can see agriculture in this state is at a real crossroads.

What’s this Agricultural Development Farmland Preservation Trust Fund you mention in your Plan?

The trust fund was established by the legislature several years ago, and I think it was originally funded at about $4 million, and after that the funding was cut and cut and cut to zero.

What’s it for?

The economic conditions we’ve been through in agriculture for many years result in a substantial debt load for farmers. Usually the biggest asset they’ve got is that big piece of dirt called the farm. If a developer comes by and he says, ‘I’m going to give you this amount of money for your farm,’ and the farmer is pondering: ‘If I sell to the developer, I no longer have a mortgage, I may have a little profit left over and I don’t have to fight this day after day.’ If we had a program where we could obtain development rights on that piece of property, that money could go to paying off that mortgage and the farm remains a viable business. The farmer still owns it, but he has sold the development rights to it. If he sold, it would have to be sold as a farm. It couldn’t be sold for a housing development; it couldn’t be sold for a shopping center. The other purpose is the farmer gets a conservation easement to help protect water supplies in some critical areas in North Carolina, and he still stays on the farm, uses best management practices, but he’s still an operating business entity.

Paying farms to stay farms?

It’s not paying them to stay farms, but it would be enticing farm families to stay on the farms.

What are the Voluntary Agricultural Districts cited in your plan?

These are areas specified in a county’s planning office and identified by signage on roads and farms. It can be an individual farmer that goes in to sign up, or it can be a group of farmers. The districts provide protection from sewer assessments that urban expansion would put on a farmer that would be a financial burden he could not bear. Hopefully, it also helps do away with some nuisance lawsuits. They are a way of letting the public know that if they want to live in a Voluntary Agricultural District, they should be prepared to encounter the sights, sounds and smells of farming. We have only 42 counties where there are Voluntary Agricultural Districts. We want to encourage all the counties to use it.

Give examples of the new enterprises your plan mentions.

Biopharmaceuticals is the use of plants to grow some of the ingredients of our pharmaceutical industry. There has been discussion over many years of tobacco being able to grow some of the drugs that we need. There is a very quickly emerging biotechnology industry out there where we can use agriculture to fulfill some of these needs. Green energy is really going to become a hot topic now. We’re talking about the use of ethanol and biodiesel. And there are other products: grasses and forages that we can grow and that can be pelletized and used for energy, renewable energy resources. That’s going to be a part of the future of agriculture in this state.

What else?

The Certified Roadside Farm Market program aims to make roadside stands more visible. Our goal is to help farmers draw more shoppers to their stands by providing signs that clearly identify a location with North Carolina products. The department will also provide posters and price cards that farmers can use in their stands. And we’ll offer tips on market appearance, displays and product quality. Participating farm markets also will be listed on ncfarmfresh.com, a Web site where consumers can search for local farms that sell produce in their area. One thing that North Carolina has is a tremendous number of small farms. Of roughly 53,000 farms that we have left, 43,000 have annual sales of less than $50,000. We have a menagerie of small farms left in North Carolina that we need to protect.

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