ANTONY FUNNELL: Today on the program we give the right of reply to David Kirk, the CEO of Fairfax Media. Now, relations between staff and management at the company are still strained despite some headway made earlier this week over negotiations on a new enterprise bargaining agreement. And that new EBA proposal is expected to go before employees soon.

However, on the issue of those 550 redundancies there's been little progress. Yesterday, staff at The Age in Melbourne got a briefing from management on the cuts and then met with a union
representative. And we understand they passed a resolution demanding that there be no forced
redundancies and accusing the company of engaging in a short term response to a long term
challenge.

As we've reported previously, the union has a dedicated website in support of affected staff. And if you go to our site you'll find a link to the official Fairfax response. It's a website called Fairfax Media, Just the Facts. As you know, David Kirk declined our offer to appear on last week's program, but late yesterday he did agree to this interview.

David Kirk, both the union and management at Fairfax have shown in recent days that there is room for compromise and negotiation on the EBA, the enterprise bargaining agreement talks. Is
management also willing to compromise on the size of the staff cuts announced last week?

DAVID KIRK: Antony, we've got to work through those cuts too. We need to consult with the union. But more importantly, much more importantly, with our employees. Remember these job cuts are across the whole business. There's 160 in New Zealand, there's 80 in the corporate and group services; there's around about 100 in the editorial and the rest are made up in a whole range of other areas.

This is a whole company-wide approach. It's being worked through from the bottom up, that is the managers in all the different areas have gone away to see how they - they think they can run their businesses better and how they can make companies stronger for the long term. So a lot of work's gone into it. And we, of course, will consult and discuss, but - but we're pretty much stuck on that number.

ANTONY FUNNELL: Now, for several days last week Fairfax management got a hammering, as you know, over the way it managed the announcement of these cuts.

In retrospect, was it a mistake to go to ground, so to speak, and you know, not to immediately front the media and give your reasoning for the size of the cuts?

DAVID KIRK: Actually, Antony, I would dispute that. I don't think that the company, by any means, got a hammering on the nature of the restructuring. In fact, most of the coverage was, still (*) in the financial press, was very positive about the company moving forward and adapting itself to the changing environment that it's in.

I think much more of the concerning coverage, and I agree with you, it was not good coverage, was over the strike, which was related actually to the EBA agreement and we needed to work through that. And clearly there was a lot of concern by a whole range of people that somehow the redundancies would affect the quality of the newspaper. The fact that the journalists went on
strike really was the - was the main issue that got all the publicity last week.

ANTONY FUNNELL: But, I mean, there did seem to be a communication breakdown, didn't there? Whether it was intentional or whether it was just not well handled, you know, communications did break down, didn't they?

DAVID KIRK: Break down between whom? I don't think they broke down...

ANTONY FUNNELL: Between management and staff.

DAVID KIRK: No, I don't think so at all. There was very extensive communication throughout the organisation on the day of the restructuring. We need, of course, to communicate with the ASX and the market, and we did that. But just prior to that, we communicated with all the affected staff via email and then meetings were held in each workplace to discuss the implications for individuals in particular.

ANTONY FUNNELL: Well, I mean, they've certainly made it clear that they didn't feel that was the appropriate way to communicate with them, via email first.

DAVID KIRK: Well, it's really - I mean, we're a pretty big company, Antony. There's 11,000 people in the company and the restructuring affected everyone. You can't - it wouldn't be possible to have a face to face meeting with every one of those 11,000 people.
But I certainly accept that quick follow up after that, you know, individually or in small groups, is
definitely preferred. And we tried to do that wherever we could.

ANTONY FUNNELL: Now, journalists at The Sydney Morning Herald and The Age have long been a force in their own right. From your perspective, do you believe they've had
too much power in the past? Too much say in the way the organisation should be managed?

DAVID KIRK: Well, when you said a force in their own right, it depends what you mean by a force - what they're a force for. If they're a force for great journalism and they're a force for great newspapers, then we're all for that. We think that's fantastic. But we do think that, you know, managers of a business are employed to manage it, and that means making decisions about capital allocation, it means making decisions about cost structures, it means decisions about where we allocate resources.

Clearly, some of those decisions where they affect the editorial are actually made by editors, but they are made in consultation with the publishers. And that really is a partnership and, you know, the partnership certainly needs to be a balanced one.

ANTONY FUNNELL: You say there's a need for business improvement, for necessary cost cutting. Isn't last week's industrial action, though, an indication that staff at your two major mastheads simply don't believe you on that and doesn't that speak of an unhealthy staff management divide within the organisation?

DAVID KIRK: No. They have to come - I have to come back to the facts. The strike last week was nothing to do with the - with the redundancy round. That certainly increased the emotion and the - and the heat in people, and now that's very understandable. So it had that influence.
But purely to understand that on Thursday last week the company okayed a stop work meeting by the staff at which they would consider the EBA proposal that was put to them and the union. And at that meeting, the staff and the union on behalf of the staff, rejected the proposal and then went on strike.

And it was unprotected action, it was unexpected and it was wildcat, to use the word that's often used for those strikes, but it was actually nothing to do with the redundancies and couldn't have been (*) - to do with the EBA.

ANTONY FUNNELL: Now, you - you didn't take industrial action against the striking staff - or legal action against the striking staff. If there is future industrial action in the days or weeks to come, will you take that legal option?

DAVID KIRK: We'll always [indistinct] as necessary, and all sides do this in disputes, reserve their position, reserve all their legal rights, and they make decisions as to what's an appropriate way to respond at the time.

You really only want to make decisions in the light of the evidence or the circumstances that you find yourself in rather than pre-judging it.

ANTONY FUNNELL: Setting what's happening at Fairfax in a - in a broader context, I mean given that we've seen similar sized cuts at major newspapers in the US over the past few years, you know, most notably big name newspapers like the LA Times, The Chicago Tribune, do you believe that your journalistic staff, and journalists in Australia more generally, that they're unrealistic in their opposition to this current restructuring?

DAVID KIRK: Well, the first thing to say is that we've seen much, much bigger cuts and many newspapers around the world, particularly in the United States. I just think it's unrealistic for our staff not to feel upset and concerned about reductions in staff numbers. I mean, that's very understandable and appropriate.

And as - as you pointed out earlier, Antony, it is management's obligation to ensure that the - these changes are properly explained and they are put into context. And that context for this company is the context of a very successful company. A company that's growing, its circulations are stable, and a company that delivered an eight - over eight per cent earnings per share growth in the last year. And that's very, very different from a lot of major publishing companies around the world, and again, particularly the United States and the United Kingdom. So that does need to be understood. So, therefore, the cuts are in the context of improving our business and preparing our business and continuing to evolve our business for a new media world. Many of the cuts, as we've said, many of the reduction in staff numbers are in streamlining and improving the editorial production process. And all businesses have to do that, it doesn't matter whether it's the media business or any sort of other business.

If there are opportunities to improve the business, use resources more effectively, that actually frees up resources for potential future investment in other areas. And it's, for me, it's those other areas, like reporting, writing, photography, editing and design skills that go into producing the paper, that are the real key advantages for an organisation like ourselves, not the more processed production type of producing a paper.

ANTONY FUNNELL: Now, you say that the business is healthy and you posted, you know, a good profit just - just over a week ago, you are trying to diversify, you've been saying that since you've - you've become the CEO, and you've bought into other operations, into radio, into online sites; nevertheless, there has been a loss in terms of classified advertising from Fairfax's broadsheet newspapers. How concerning is that?

I mean, reports, or there was a report this week, that suggested that the classified figures for your operations in Melbourne were three million behind budget for the first eight weeks of this financial year. Can you confirm that the situation, in terms of classifieds, is that bad?

DAVID KIRK: Well, the point, Antony, exactly is that the diversification that the company's gone through in the last three or four years has really been what has helped us deliver a - a really solid profit result in the '08 year. That's the nine - the eight per cent earnings per share growth I just mentioned, or nine per cent [indistinct] growth on a like to like (*) basis, in the context of a metropolitan newspapers decline of nine per cent. So the earnings from our Sydney and Melbourne metropolitan newspapers went down by nine per cent, but the earnings for the whole corporation went up by eight per cent. So you can see the diversification on the growth of our online and digital business, and its really solid performance from our community and regional newspapers and from the Australian Financial Review and our agricultural publications, has meant that the company is now very well positioned for some of the structural changes. And that is, just as you say, the classified advertising leakage from the big papers.

ANTONY FUNNELL: But isn't it the case that it's that classified advertising revenue that's been the backbone of the - of the company? And when you look at that move to online classifieds - I mean, really that market, the online classified market, has largely been sown up by the likes of Seek and Realestate.com.au, you know, companies that are in competition with you.

DAVID KIRK: But the point that you're missing here, Antony, is that - you said hasn't classified advertising been the back bone of the company. Yeah, it was the backbone of the old company, the company that was a pre-diversification company. The metropolitan newspapers, which rely very heavily on that classified advertising, are now less than 20 per cent of the earnings of the - of the total corporation.

So, you know, while it's an unwelcome loss of revenue, any loss of revenue is unwelcome. It's not the killer blow that it would have been five years ago, by any means, when the metropolitan
newspapers would have been something like - contributed something like 75 per cent of the
revenue of the - to the whole company.

ANTONY FUNNELL: A previous management at Fairfax famously passed up the opportunity to purchase the Seek online classifieds site, you know, which is now a dominant force with the classifieds. How much of your - your company's current financial problems, if you like,
you know, the need for restructuring, how much of that is due to poor management in the past?

DAVID KIRK: Well, I think in terms of that specific example that you - you state (*), it would be lovely, it would be great to own that business, but the fact is we don't. And, you know, all managers make decisions in the light of the information that's available to them and
it's all very easy in hindsight to say, oh, that was a good one and that was a bad one. And I just don't - don't get into looking back and saying - and trying to apportion blame or say that things could have been done differently. It's just not productive.

But the fact of the matter is the changes that we're making at the metropolitan newspapers are all about producing our newspapers more effectively and more efficiency. There'll be no diminution in quality whatsoever and we'll be more efficient. In other words, we'll be able to produce papers with less people. That's partly to do with technology, it's partly to do with improving rosters.

So [indistinct] a six day roster at the Sydney Morning Herald and a one day roster at the Sun
Herald, we can have seven day rosters and people can work more efficiency across the two papers.

And partly it's to do with just straight productivity. People being able to, with better training and
incentives, work more productively and do more in the time available.

ANTONY FUNNELL: Look, David Kirk, just one final question. I have to ask you about the criticism that's been levelled against you and Brian McCarthy about quality journalism. And the criticism is that you don't value it because you don't come from a journalistic background. I mean, what's your response to that?

DAVID KIRK: Well, if it's - I've got two responses to that. The first response is that it's not necessary to come from a background to value it. I mean, I'm not sure, Antony, you may be a much better - you know, be a great painter for all I know, but you can go to an art gallery and you look at a painting - can look at a painting on the wall and you can value it and understand it and really see that painting for what it is, a fantastic piece - a masterpiece, but not be able to paint yourself. So I firstly think it's a completely fallacious argument.

But it's actually not true either. I've had quite extensive experience in writing. I wrote a column in
a newspaper in New Zealand for - for five years and I've written regularly for a lot of publications
around the world. I've authored one book and coauthored another book. But, you know, that for me is not the main argument. The main argument is that you don't need to be and have had, you know - be a great painter to be able to appreciate a great painting.

ANTONY FUNNELL: David Kirk, the CEO of Fairfax Media.