AP staffers in thirty-nine bureaus across the country picketed outside their bureau offices early this week, pressuring the news wire to back off a plan to freeze pensions for some 1,250 workers. The freeze is the final sticking point in protracted contract negotiations that began in October between the AP’s HR representatives and lawyers and representatives from the News Media Guild. The AP won’t budge—like other outlets, it say times are bad and sacrifices need to be made. Its employees say they’ve sacrificed enough.

On Tuesday, I stopped by the rally outside the AP’s New York City bureau, which is housed in a grimy concrete swoosh of a building on the far western edge of midtown Manhattan. The turnout was smaller than expected: a similar rally in March drew about a hundred supporters; Tuesday’s peaked at about thirty. It was probably the cold and the rain—a D.C. rally was moved to Wednesday because of torrential downpours—but the ralliers who did show up were in good voice. Sporting large red badges that said “We Keep AP Working,” as well as red caps and jackets—it’s the Guild’s official color— they stood across the road from the bureau building and chanted, “Hey, hey! Ho, ho! AP’s proposal’s got to go!”

At one point the group of AP workers, retirees, and supporters issued something like an angry birdcall: “Cheap, cheap, cheap.”

Daniel Derella, a photo editor with the AP for almost fourteen years, was one of the louder chirpers I noticed. Holding a sign that read “You Can’t Spell Cheap Without AP,” he told me the proposed pension freeze would see his expected retirement money halved. “We all make sacrifices for the company when you have to,” said Derella, who lives with his wife and son in Queens. “You forgo pay rises for your future and in the long run you expect to have a little something extra to help you out.” He seemed to sum up the mood of those at the rally when he added, “Everybody understands it’s a tough economic time, we just want a fair and equitable contract.”

Getting there is proving a problem. Negotiations between the News Media Guild and representatives of the news wire began last October; more than a month before the then-current contract was due to expire, on November 30, for the 1,250 AP staffers—among them reporters, editors, graphic artists, photographers, videographers, researchers, technicians, and workers in the mailroom. Six months later—and after a Guild campaign that has included petitions and letters to CEO Tom Curley—the expired contract is still in effect and movement toward a replacement has hit an impasse over the pension issue.

There has been some progress. Originally, the AP proposed a raise of 1.5 percent within in the first year of the new contract, with another $500 bonus not tied to a percentage. Now the AP is proposing a 1.5 percent raise that would go into effect upon an agreement with the Guild, and a further 1.5 percent raise, effective September 1, 2011. Staffers would receive another 1.5 percent increase in September of the following year.

On the one hand, that’s significant: AP employees have not had a wage increase in two years. On the other hand, the increases will likely fall short of the rate of inflation, which is expected to rise further as the economy strengthens.

In another compromise, the AP has also agreed not to raise monthly health plan contributions or to change the design of the plan, which had been part of its original proposal. In a postscript to an e-mail that AP’s human resources VP Jessica Bruce sent to staff last week—leaked to Romenesko but published there without the postscript—AP claimed the proposal, removed as “a concession to the union,” would have saved the organization $1.1 million annually.

Now the talks hinge on pensions, and the AP is refusing to budge on plans for a “pension freeze.” Staffers hired by AP since 2006 work under a defined contribution plan into which AP puts 3 percent of an employee’s salary annually. Management wants to transition employees hired before 2006 onto the same plan, moving them from a defined benefit plan, where the AP assumes most of the risk on investments, to a defined contribution plan, where employees assume the bulk of the risk.

In the leaked memo, AP said it would “ease the transition from one plan to the other” by making “additional contributions of 1 or 2 percent of salary per year—depending on the employee’s length of service—for seven years.” Adds the memo: “That’s an increase of two years from the transition period that had been proposed originally.”

Linda Johnson, the Guild’s mobilizer and an AP business reporter who covers the pharmaceutical industry, says the AP’s claim that a pension freeze is essential is disingenuous. A guildswoman to the core—she even has bright red hair!—Johnson was busy handing out signs and leading chants on rally day, but I spoke with her about the negotiations Monday. The union put forward a proposal last month for an alternative pension plan, which Johnson describes as “a very innovative compromise pension,” that would cover everyone—including new hires—and remove most of the AP’s risk. Rather than determining AP’s contributions based on the market performance of investments in the fund, the proposed fixed cost plan would see management negotiate with employees on a fixed amount that would go in each year; the amount of an employee’s salary that goes in would be determined by factors such as how much they were earning and what was in the pool for that year. The rate at which benefits accrue each year would match market conditions.

It’s complicated. But never matter, the proposal was rejected last month.

Guild president Tony Winton, who has been involved in the negotiations and who was busy in the latest round while the rally was taking place, says the proposal went a long way to addressing AP’s concerns that the current plan’s ties to market conditions made it unpredictable and volatile.

“We don’t get it,” says Winton. “We made a proposal that we thought addressed AP’s needs as they stated them earlier in the bargaining. We have fewer reporters and new workers working harder because of the layoffs. We had a two-year wage freeze. We accepted reductions in the medical coverage to make the plan more efficient. We don’t see the rubber meeting the road.”

“They want to freeze the pension,” Johnson says bluntly. “They have come up with one excuse after another—most of them bogus—and every time we address their issue, they say, ‘Well, we have this problem.’ Last time they said if they keep the pension it would hurt their ability to borrow. First of all, AP is almost debt free, unlike other news organizations. Second of all, they’ve had a pension for years and always been able to borrow. They are just throwing out any kind of ‘BS’ they can come up with.”

Most members of the AP Board of Directors are heads of newspaper groups—among them the vice chairman of the New York Times Company and the president of Gannett—and, claims Johnson, “they have basically been pushing the AP to inflict the same pain in the staff that they’ve had to.” Whether that’s true or not, there is likely to be some pain. Staffers like Derella at the rally worried that their retirement funds were going to be cut by 40 to 50 percent. “We feel like we’ve been bargaining in good faith, we’ve made a lot of good proposals, we’ve compromised on a lot of stuff,” says Johnson. “AP is just dead-set: they want to get rid of the pension.”

Ken Dale, senior vice president and chief financial officer of the AP, says that the problem with the counter-proposal was that it did not provide the same level of financial certainty as the AP’s plan. “What the Guild has proposed—which is another way of doing a defined benefits plan—provides certain income guarantees [for employees], or certain return guarantees, that a defined contribution plan that we’re offering does not,” he explained during a phone call Monday. With the AP’s plan, he says, the company can say for sure that when it puts its money out, that is the limit of what it will put out and there will be a certain liability in the future. “Unfortunately, right now with the defined benefit plan, the liability is unknown.”

And certainty is a valuable commodity at the AP these days.

As the Guild points out frequently in its literature and in conversations, the AP has suffered less than many other media outlets during the downturn. Newspapers are hurting and the trickle-down effect is felt at the newswire, but newspaper contracts with the AP account for only 25 percent of its revenue. Money comes in from online clients like Yahoo and Google, sales to government agencies and political campaigns, the resale of photographs, and elsewhere. But the diversified revenue stream has not made the AP completely immune to damage. “It does cushion the blow,” says Dale, “but it’s still a blow.”

How big is that blow? Revenue fell from $748 million in 2008 to $676 million in 2009. Net income fell 65 percent between 2008 and 2009, from $25.1 million to $8.8 million, and the AP would have posted a loss in 2009 had it not sold its German-language news service for $13.2 million. Dale says we can expect that the company’s annual Consolidated Financial Statements, released on April 13, will show revenue has fallen further, to around $630 million.

If that happens, the AP has reported it will be the first time the news wire has had consecutive annual revenue declines since 1932-1933. “If you compare our revenue dropping by about 16 percent in two years against the rest of the media world declines—in arrange of about 25-30 percent, particularly among print publishers—it’s pretty respectable for us,” says Dale. “Unfortunately, we’re living in a shrinking media environment right now with respect to where money is being spent, particularly for news content. We’re all kind of struggling to take share of the fewer dollars that are out there.”

Standing in the rain on Manhattan’s west side on Tuesday, you get the feeling staffers aren’t going to give up much more to that struggle. “We have not had a raise in two years,” said Johnson. “We made sacrifices on the health care plan in the last contract and the staff has been greatly reduced. You have a significantly smaller number doing much more work. We’ve already made a lot of sacrifices.”

Another AP worker who asked not to be named said: “My impression is that the company is trying to take advantage of the environment.” Another repeats a quote he once heard that he particularly likes: “Work long enough for the AP and you lose money.”

Staffers have given up a lot to make their voices heard in the contract negotiations. As well as the tough-negotiation staples—rallying, withholding use of their personal cars when reporting stories, and, in a new media twist, refusing to Tweet and re-Tweet AP stories—they have held three byline boycotts, twice for two days and once for a week. “It’s a huge protest,” said Johnson. “People are very proud of their work and for them to take their name off of their work is like a huge scream: we’re really angry.”

So far, the protests have not really damaged the AP’s image. The news wire’s director of media relations, Paul Colford, was probably right when he wrote in an e-mail to CJR, “AP is a strong brand, with a distinguished history. I believe this is not the first time that contract negotiations took time.”

And the ralliers agree with his assessment of the brand—the reason they all say they’ve sacrificed so far is because they love their work and believe in the AP. The day before leading the “Cheap, Cheap” chant, Johnson told me that while the AP has its problems, “I like a lot of things about working for AP, the most important being that I work with some phenomenal people. We have some just brilliant, talented, dedicated people. I enjoy that. And when you work for AP you get to help set news agenda, for the world.” Derella, taking a moment between chants, said, “The reason you work here is the people you work with. I’ve made friends around the world, been able to travel. AP has been good for us.”

The news wire has its annual meeting Thursday and negotiators are hoping to reach a deal soon.

Update: AP this morning forwarded me a summary of Tuesday’s negotiations sent late last night to the news wire’s news leaders and department heads by AP’s director for global labor and employee relations Michelle Ehrlich. The key points are that the Guild, according to the summary, conceded that the current defined benefits scheme is unsustainable and presented another counterproposal to AP’s negotiators. AP looks unlikely to accept it. From the summary:

Today [Tuesday], the News Media Guild took an important step and acknowledged that the old pension, a defined benefit plan which most other companies in our industry have phased out, was no longer sustainable if the AP is to remain competitive. The Guild presented a counterproposal which provides a freeze of the defined benefit plan and replaces it with a defined contribution plan.

Astonishingly, the cost of the Guild’s defined contribution plan—estimated to be $30.8 million over five years—is twice the cost of the company’s proposal. The Guild’s counterproposal further impedes resolution because its costs would only continue to grow beyond the initial five years, which is when AP’s plan would show the most savings. Since January the AP has explained that those savings would be used to stabilize and grow its position in the marketplace.

There were also signs of growing frustration at the protracted nature of the negotiations. Ehrlich wrote:

There is very little time left to solve this. A pension freeze must be in place by July 1 and will take months to administer under pension regulations, so the process must begin very soon. If the pension is not frozen, cuts will have to be made elsewhere. And as [Human Resources VP] Jessica Bruce said in her note to staff last week, personnel costs are the company’s biggest expense.

…The future of the company rests on a swift and reasonable conclusion to negotiations.
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Joel Meares is a former CJR assistant editor.