Captain Bob's Amazing Eleventh-Hour Rescue

By WILLIAM A. HENRY III

When American newspapers were in their heyday after World War II, the brassy, pictorial New York Daily News led all the rest. Its 1947 circulation of 2.4 million daily and 4.7 million Sunday was bigger than any daily achieves today, although the U.S. population has nearly doubled. But like many now vanished media giants, the News gradually succumbed to its own success: with profits pouring in, time and again, management agreed to union demands for unneeded jobs, overtime guarantees and restrictive work rules, rather than risk a strike. By the 1980s, featherbedding was so extreme that despite annual revenues approaching $425 million, losses averaged $1 million a month. At least twice, the parent Tribune Co. in Chicago explored a shutdown. Both times the plan foundered on the immediate price tag: more than $100 million, mainly for severance pay and pensions.

Last week, after having lost almost $250 million on the News since 1980, half of it within the past year, the Tribune Co. finally gave up. To end a sometimes violent five-month strike, during which the paper kept publishing but virtually all revenue disappeared, the News was "sold" to British-based media tycoon Robert Maxwell, 67. In truth, the "buyer" was paid $60 million just to take the paper off the Tribune Co.'s hands. The bulk of that will go to buyouts and severance pay. To add to the Tribune Co.'s pain, in just six days Maxwell extracted $72 million in union concessions, more than the old owners had demanded in provoking the strike. Union leaders gave up 800 of 2,600 jobs, accepted a one-year wage freeze and agreed to rule changes that for many workers may amount to a pay cut. The one thing they did not concede was what the Tribune Co. most intransigently sought: management's right to determine how many jobs were needed, rather than having staff levels guaranteed by contract.

The message was clear. Far from being grateful for the time and money the Tribune Co. had invested, the fed-up employees preferred almost anyone else. Not that Maxwell is just anyone. He is both a buccaneer billionaire and a professed socialist, renowned for a blend of macho charm and armored-tank aggressiveness. A British union leader once ruefully observed, "He could charm the birds out of the trees, then shoot them." Although decorated by British Field Marshal Bernard Montgomery for World War II valor and elected in 1964 as a Labour Member of Parliament, Maxwell was involved in a corporate takeover battle that led Britain's Department of Trade and Industry to conclude in 1971 that he could not "be relied on to exercise proper stewardship of a publicly quoted company." The rebuff hardly stopped him: his empire embraces more than 450 companies, with interests ranging from dailies in Budapest and Nairobi to soccer teams in Britain and a pharmaceutical house in Israel.

George McDonald, head of the allied newspaper unions in New York City, conceded he had been warned by a union official in London that "Maxwell is a rogue . . . watch out for him." Instead, McDonald and colleagues found themselves praising the new owner -- who at week's end still required formal rank-and-file ratifications -- as a "tough negotiator who understands problems fast." They enthused about how straightforward and plainspoken he was, how quick to extend a hand to shake on a proposed deal. Having reduced the options to Maxwell or nothing, they did not challenge his characterization of the cuts as "historical, unprecedented and necessary to guarantee the return of the Daily News to the streets of New York."

If anything, the question is whether the cuts will prove enough to keep the News there. Says newspaper analyst John Morton: "Maxwell has made a very risky move." During the strike, which led to truck burnings, beatings and intimidation of news dealers, the unions so effectively discouraged sales of the paper that the Tribune Co. practically gave it away. It let hundreds of hawkers, many of them homeless, buy stacks of 100 copies for $2.50 to peddle at 35 cents each.

This combination of controversy and unmeasurable circulation (down from 1.1 million before the strike) drove away advertisers, most of whom increased their exposure in the competing tabloids, the scandal-minded Post and the more pious New York Newsday, a city-oriented version of the dominant paper on suburban Long Island. While many plan to return, now that the News has union blessing, some advertisers have cut budgets in a slumping economy, and others are concerned about when, or if, the News can rebound to pre-strike levels. Its rivals, which raided columnists and the syndicated supplement Parade, have upped their combined circulation by 300,000. By some estimates, News losses were twice that. If past strikes are any indication, a sizable percentage of readers who got out of the daily habit will never resume it with any paper.

But hundreds of thousands of New Yorkers remain loyal to the sassy Daily News, which over the years has been celebrated in song (by Frank Loesser and Phil Ochs, among others) and screenplay (its Art Deco building on Manhattan's 42nd Street was reporter Clark Kent's workplace in the Superman movies). For the tabloid's fans, Maxwell's moxie may prove congenial. He has shown a shrewd feel for the city's odd blend of worldliness and parochialism. Playing to Manhattanites' penchant for embracing almost any outsider who professes himself instantly smitten with their metropolis, Maxwell arrived by yacht to start negotiations and, before stepping into a waiting Cadillac, spoke the tantric words, "I love New York." Recalling the tradition of the News as "the people's paper," Maxwell said, "I want it to be, first and foremost, the voice of New York for the ordinary man. It will assist the town with its fiscal problems. I would also hope that the News would come to be seen as an important voice internationally to tell the world how America feels." Maxwell insists that the News will "certainly not" install a staple of his beetle-browed London Daily Mirror (circ. 3 million) -- cheesecake photos of women.

Among Maxwell's "secret admirers" is his new rival, owner Peter Kalikow of the Post, who says, "I like his background. His kind of rags-to-riches story happens in America a lot, but not in England." Born Jan Lodvik Hoch of Jewish peasant parents in Czechoslovakia, the future Maxwell left school after just three years. At 15 he joined the Czech underground. The Nazis shot his father and sent his mother to her death in a concentration camp. Wounded and captured in France, he escaped to Britain and joined its army at 16. After serving in postwar Berlin as a press officer (he speaks at least eight languages fluently), Maxwell acquired a small company in 1949 that he built into Pergamon Press, an important publisher of scientific and educational books.

As he expanded in the print business, many firms he launched or resuscitated were obscure, technical in orientation or uninfluential. But since May 1990, he has spent an estimated $40 million launching the European, an English- language newspaper to compete with the International Herald Tribune. A self-made man who is reportedly Britain's ninth richest, with a net worth of $2 billion, Maxwell has earned wide esteem in London's business community. He is robustly satirized, however, by the leftish Private Eye in the comic strip Captain Bob. Among his fiercest critics are former employees. One claims Maxwell is so manipulative that he scheduled simultaneous lunches with former Secretary of State George Shultz and Paramount studio owner Martin Davis in different rooms at the same restaurant, shuttling between them on the pretext of taking business calls.

For the next six months, Maxwell pledges, he will stay in New York City and serve as Daily News publisher -- a bold step, since associates say his far- flung empire is so chaotically structured that only he has a clear sense of it. He believes in hands-on management of newspapers. After launching the London Daily News in 1987 and folding it within five months in the wake of reported losses of $50 million, he vowed never again to leave management of a daily to its staff. At the Daily Mirror, Maxwell sometimes wrote editorials, and says he may do so again at the Daily News. The downside of his intensity is that he tends to lose passion for projects and move on to new obsessions.

Some London business analysts question whether his interest in the Daily News will outlast the first heady gust of publicity. Others think he is determined to succeed where his archrival, Australian-born media mogul Rupert Murdoch, failed. Murdoch, who bested Maxwell in London to buy the Sun, News of the World and the august Times, burst onto the New York scene by acquiring the tabloid Post in 1976. During the next 12 years, Murdoch lost $150 million before being legally compelled to sell because he also owned a local TV station.

In one regard, at least, Maxwell starts with a huge advantage. The first $60 million he loses will be someone else's money.

CHART: NOT AVAILABLE

CREDIT: TIME Charts by Steve Hart

CAPTION: Maxwell's deal with the DAILY NEWS

CHART: NOT AVAILABLE

CREDIT: TIME Charts by Steve Hart

CAPTION: MAXWELL'S EMPIRE

With reporting by Helen Gibson/London and Leslie Whitaker/New York