The Philadelphia Inquirer will close its sprawling Montgomery County printing plant and shift production of its newspapers to a New Jersey contractor. The cost-cutting move will put as many as 500 employees out of work, but is aimed at ensuring the survival of the media company as consumers turn to digital platforms for their news.

The company on Friday told employees that it plans to close and sell the Schuylkill Printing Plant in Upper Merion Township, perhaps by the end of the year. The Inquirer is negotiating with a buyer for the 45-acre River Road property, which includes a 674,000-square-foot manufacturing facility that opened in 1992. The buyer’s identity and plans were not disclosed.

“While the sale is not yet final, we recognize how deeply unsettling and distressing this is to employees at the printing plant,” Lisa Hughes, The Inquirer’s publisher and chief executive officer, said in an internal memo Friday to employees.

“They have served our readers tirelessly, with dedication and devotion to the craft,” Hughes said. “Many of them have spent decades with the company — and all performed their jobs valiantly when the pandemic arrived.”

About 500 of the 550 employees who work at the plant will be laid off, nearly half of The Inquirer’s total workforce of 1,073. The company publishes two newspapers, The Inquirer and the Daily News.

John Dagle, president of Teamsters Local 628, which represents 300 of the workers, said he was “blindsided” by Friday’s announcement. He said company officials had in recent weeks told him The Inquirer would sell the property and lease it, rather than close the plant. A company spokesperson declined to comment.

“It’s a kick in the gut to over 500 loyal employees and their families,” he said. Many of his members — drivers, mailers, security guards — have been with the company since before the plant opened in 1992.

Hughes said proceeds from the sale of the plant will be used to enhance severance packages for laid-off employees beyond the company’s obligations under union contracts. The severance terms, including paid health care and outplacement services, will be negotiated with the eight bargaining units that represent most of the plant’s employees.

Dagle declined to share details of his local’s contract. He said no negotiations have been scheduled.

The company will outsource production of its two newspapers to a printing plant in Cherry Hill, a union operation owned by the Gannett Co. Inc., the nation’s largest newspaper company. Gannett may hire some of The Inquirer employees, but there are no guarantees, Hughes said.

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The publisher said there are no immediate plans to change the number of editions printed. “Readers will see no interruption in their service,” she said in an interview. “We’ll continue to print seven days a week. Delivery times will remain unchanged.”

In closing its own presses, The Inquirer joins an industry trend to shut down plants with excess printing capacity and to consolidate the work at centralized printing facilities. Gannett, which owns 260 newspapers including USA Today, closed 23 of its own printing plants in the first half of this year to cut costs and gain efficiencies.

Hughes said that the closure of the printing plant will result in a net annual reduction of $19.3 million in operating expenses, which would return the company to profitability after a dramatic decline in revenue this year because of the coronavirus recession.

The company explored other options for the Schuylkill Plant, where only two of nine printing lines are currently needed to produce The Inquirer and Daily News. But the production work The Inquirer does under contract – it also prints the New York Times, the Wall Street Journal, and Barron’s – is drying up as those publications also consolidate their manufacturing operations, Hughes said.

“It’s not a close economic call,” she said.

The Inquirer is owned by the nonprofit Lenfest Institute for Journalism, but it operates as a “public benefit corporation,” meaning that while public interest is at the core of its mission, it still functions as a for-profit business.

A difficult decision

With advertising shifting to digital media outlets, the company’s revenue had been on a steady downward trajectory in the last decade, declining from $256.9 million in 2011 to $139.5 million in 2019, a 46% drop, according to information the company provided. The Inquirer projects that revenue will decline by $19 million more this year as ad sales have contracted dramatically during the coronavirus recession.

Still, Hughes said the decision to exit the commercial printing business was difficult.

“I do believe that the decision will ensure our business and our journalism for the future, and that’s what I have to look at,” she said. “These changes I believe will provide the economic stability to help ensure our core mission, which is to provide vital news and journalism to the community.”

Friday’s announcement was separate from workforce reductions in the newsroom and advertising divisions, which have also lost staff this year.

But in a memo to NewsGuild members sent Friday, union president Diane Mastrull wrote that she would argue that the savings from the plant closure should halt any newsroom layoffs.

“Enough with the cuts, already,” Mastrull wrote.

The news industry has been undergoing a dramatic transformation in recent decades as consumers shift to digital means of receiving content and away from legacy media outlets, including newspapers, magazines, and broadcast channels.

“I don’t think we’re alone,” said Hughes, a former executive in the magazine industry who became publisher in February. “These are secular pressures.”

News industry analyst Ken Doctor said many newspaper operators are wrestling with the same challenges facing The Inquirer. He called the production of newspapers an “old industrial business model” that is undergoing a “slow grinding obsolescence” until the digital business can sustain itself on subscription and advertising revenue.

“What The Inquirer is doing is readying itself to become a digital majority business at some point, and if it can make that transition well, this is just a step in that process,” he said.

The Inquirer’s print circulation has declined by more than 60% since 2011, and its advertising revenue has dropped by 80%. Revenue from subscriptions has declined by about 9% since 2011. But an increase in subscriptions from online readers has not yet offset the decline.

End of an era

When the Schuylkill Printing Plant first opened in 1992, it housed 1,000 workers. Today, its 550 employees include 325 full-time and 225 part-time and temporary workers. About 86% of the plant’s workforce is male, and about 67% white, 22% African American, about 8% Asian, 3% Hispanic, and about 1% Native American, the company said. The company declined to provide data on average age, length of service, or pay.

Dagle said many of his members are in their 50s or older and will face tough employment prospects.

The closure of the company’s printing plant is among the most dramatic changes in the 191-year history of The Inquirer, marking its exit from newspaper manufacturing. The sale of the Schuylkill Plant would also mark the company’s exit as an owner of real estate, following the 2012 sale of its iconic Broad Street headquarters tower. The company now operates from leased Center City offices.

The Inquirer and Daily News in 1992 moved their printing operations from Broad Street to the Schuylkill Plant. The plant was built on land the company bought for $6.9 million in 1989, the year The Inquirer’s circulation peaked at more than a million Sunday newspapers and about 500,000 daily copies. At that time, the company employed more than 3,000 workers.

The Inquirer’s projected 2020 Sunday circulation is about 156,000, and the combined Inquirer and Daily News weekday circulation is about 91,000 copies. But the decline in print circulation has been offset by growth in digital readership and other ventures, including newsletters and live events. Inquirer.com has about 45,000 paid digital subscribers, and the website’s monthly average for unique users is about 10.5 million.

When it opened, the Schuylkill Printing Plant’s Goss Colorliner presses were the “biggest, fastest, and most automated presses,” the company said, and accounted for $160 million of the plant’s total cost of about $300 million.

The cavernous printing plant contains about 462,000 square feet in manufacturing space, 74,000 square feet in warehouse space, and 85,000 square feet in offices, according to tax records. It also includes an internal rail siding large enough to contain 12 boxcars.

The company pays about $308,000 a year in property taxes for the site just north of West Conshohocken. It’s uncertain how Upper Merion’s tax revenues might be affected under a new owner.

The site is likely to attract industrial interest because of its rail access and nearby access to the Schuylkill Expressway, I-476, and the turnpike. Its immediate neighbors include a FedEx distribution center and a GlaxoSmithKline PLC pharmaceutical complex.