Quebecor’s woes continue

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We don’t have what we’d call a commanding grasp on the Quebecor story, but after talking to a few people yesterday the pieces are beginning to come together. The short version is that Quebecor, the Canadian printers who manufacture most of the comics from (at least) DC, Image and Marvel is in a financial crisis after years of mismanagement, and needs to either re-finance or file for bankruptcy. Matt Brady runs down the story and concludes that the impact on comics will be minimal:

Despite the rough seas it’s currently navigating, Quebecor is a huge, multinational corporation, and while what’s going on in regards to its finances isn’t ideal, desirable or even normal, it’s not unprecedented or a direct route to the end of the business. At the end of the day, Quebecor World will refinance its debt and move on (albeit with a limp, most likely) or it will further weaken, and be bought out by a competitor who will work to keep its accounts. Now, if that happens, there is a question about pricing pressure due to reduced competition, but even that’s still a far way off if it ever comes to pass.


While this is a sensible and level headed conclusion, folks we spoke to are certainly looking into their printing issues this week, and the company’s uncertain future is causing headaches at the very least.

Quebecor is part of Quebecor World, a multi billion dollar international conglomerate that employs some 28,000 people around the world. A series of bad investments and poor business decisions over the years have left it saddled with debt and unable to make its loan payments. Its stock has been delisted on the NYSE.

Quebecor spokesmen insist the presses will keep rolling, although there are many rumours regarding potential stoppages floating around — none of them sound very credible at this point.

One thing that did strike us as we spoke to people in various ends of the business yesterday was how suddenly this hit the comics industry. Quebecor has been struggling for a bailout for a year, and yet “I’ve talked more about Quebecor this week than I did in the previous year,” one printing industry insider told us. While comics publishers may not need alternative means of printing, its a sure bet that they are still looking into other printers, including Transcontinental and the Chinese printers who are increasingly taking over trade paperback publishing. Based on the number of complaints about production mistakes at Quebecor, some people will be happy to make a move.

While many comments on this story have pointed to the weak American dollar as part of the problem, it seems to be secondary to Quebecor’s ongoing bad business decisions. Should the printer declare bankruptcy or be acquired by another printer, contracts may need to be renegotiated — and the puny dollar leaves the potential for rising costs there.

So the word for now is no one knows how this will affect the cover price of comics; but the likelihood of a disruption in the timely flow of weekly floppies appears minuscule.

For more on the history of Quebecor’s financial problemsthis story from the Globe and Mail paints a colorful picture including father son conflicts and a riot by laid-off workers at a French plant. It’s a real how the mighty have fallen tale:

How did a company once held up by provincial premiers as an example of Quebec Inc.’s global clout get to this perilous point?

Quebecor World, which in 2002 laid claim to being the world’s biggest commercial printer, is now a penny stock with a market capitalization of barely $25-million. It is threatened with being delisted from the Toronto Stock Exchange. That is, if it manages to stay out bankruptcy court and remain a going concern.

The road since 2002 is littered with missed opportunities, poor decisions and enough internal bile to make the case study stacks at Harvard Business School – which happens to be the alma matter of Wes Lucas, 45, who suddenly quit as Quebecor World CEO last month on the heels of a couple of particularly fateful stumbles.

Comments

  1. Let’s hope this same sort of oops-we-put-all-our-comics-in-one-basket type of regret does not one day happen with distribution.

    If one huge North American printing company can dominate the industry, and then start to have financial trouble, what if one huge North American distribution company has the same trouble one day? Ah, that’ll never happen, ha ha..

    hmm. Time to develop an scenerio to accommodate alternate printers AND alternate distributors.

  2. First off, note that it’s Quebecor World that’s in trouble, not the parent, Quebecor. “QW” was formed when Quebecor bought out World Color, perhaps better know to comic industry old-timers as Sparta.

    Anyways, financial staggering is hardly new to Quebecor. Last time around it was Quebecor’s cable TV – TV network division that was the problem. QuebecorWorld was financially solid, and saved that day.

    You’ll note that the bridge financing of $400,000,000 spoken of in the recent round of stories has 200 coming from an outside source, and the rest coming from Quebecor. It would appear that the parent company isn’t too strapped for cash nowadays. The shoe’s on the other foot.

    There is a big consideration here: There are four companies in Quebec who, while not necessarily associated with the nationalist/separatist political movement, are held up by whatever government is in power as examples of Quebec’s ability to stand on its own as a nation. Quebecor is one of them. They’re not just heralded as successes, they’re symbolic of nationhood. It would be unthinkable for the Quebec government to let any of them fall.

    There’s an organisation here that manages the provincial pension fund, and it has never shown any hesitation to dump money into a flagship company in trouble. Depending on what government is in power, they can be very strict or quite loose with funding. Unfortunately for Quebecor, the current government isn’t the one who just opens the bag and says “take”.

    Nonetheless, “Le Caisse de Depot” will NEVER let Quebecor fall. If push comes to shove, and Quebecor goes to the Caisse, we may see the end of Pierre-Karl Peladeau’s rule at the company, but it won’t be allowed to fall. I see Pierre-Karl’s solid, stolid brother Erik as the possible successor.

    By the way, that pension fund (last I noticed it had something like 30billion in assets) was once headed by Quebecor founder Pierre Peladeau.

    Quebecor and the Peladeau family’s trials and tribulations have been a virtual soap opera here in Quebec for several decades. This latest round of problems is seen within the province as pretty much same old, same old. It only gets really interesting when the government starts making noise.

  3. Paul Stock, thank you for that greatly informative little rundown on Quebecor’s relationship with the Government! :)

  4. Patrick says:

    Paul Stock, excellent article … almost right on the money except that Erik Peladeau will never be the head of this company… Also strong possibility of a company breakup after the refinancing… And BTW la caisse de depot has a large position in IQW and has lost tons of money… Will they do so again?

  5. I live in Burlington, VT… close to Montreal where Quebecor is based, and there was a story in the local news several years ago about them being on the verge of bankruptcy.

    I think they’ve been on thin ice for a long time.

  6. Patrick, thank you. I’m hardly a Quebecor insider, just a casual observer, so I can’t agree or disagree with your points.

    Just that they seem to be getting a bit of resistance here and there, and while it has been over 10 years since the old man kicked off, I have to wonder if Erik might be still harbouring a bit of …resentment (and a fair political base) himself.

    After all, the old man did pit one against the other, finally anointing the “wild” kid (with the same philosophy and law degrees as Dad) in preference to the dutiful kid, who virtually grew up tending the Quebecor fields (and is still, I think, COO). Just a little bit of Esau and Issac going on, yes?

    Personally I’d like to see the daughter (Anne-Marie?) take over- she has a completely different attitude towards raising money. :)

    As far as the caisse goes, well, they’ll squawk, but ultimately I think they’d no more allow a Quebecor, Lavelin, Jean Coutu or Bombardier to fade than the Japanese government would allow Toyota to collapse.

    To “It’s Alive”: The rise of the loonie has been going on for quite a while- four or five years. It gained a lot of publicity lately when it reached parity through a rapid rise from 20% to equal, but nonetheless, it has been a very visible path since the Iraq thing started. Equally unnoticed during most of its climb is that ink on paper has been increasing. A $2.25US standard comic is now $3.00, a $6.99US book is now $8.99 or more.

    There’s lots of shenanigans in routing the print shop (I actually do have an insider) regarding “American” print jobs being produced in Quebec, despite Quebec being more expensive for Quebecor due to union regs and such. This is where Quebec politics plays a heavy role. The rise of the dollar has certainly exacerbated the situation due to locked-in US dollar contracts, but there are SO many factors involved, that frankly the exchange shouldn’t make all that much difference. After all, the physical cost of manufactured comic is something around 1/10 of retail. US dollar cost per piece grows from 30 cents to 40 cents? Retail price grows to match.

    There’s one price factor that far outweighs the dollar: Timber prices. With the shrinking print market, and the moribund housing industry in the US, big loggers are (not quite) going begging for work. Happens I have a managed woodlot that’s due for harvest, but there’s no way I’m going to have it cut, not with where the market is nowadays.

    Frankly, I don’t know what the effect has been at the paper mill, they may actually be increasing prices due to a higher overhead to production ratio, but whichever way it’s going, I think that timber fluctuations far outweigh dollar fluctuation when it comes to book costs.

    But that’s a whole other load of stuff to consider…

  7. Anne-Marie as the head of Quebecor is classic Paul. If there is anybody in Montreal who knows his comic business and is way ahead of his time as a comic vendor and wit to boot, Paul is your man. Having dealt with Quebecor just last summer when I printed an all ages comic book newspaper, I had to go through hoops just to sign a contract with them. They lost the first set of contracts. Being fed up after doing it three times, I told them I would pay cash. They did not want the cash. Maybe Annie-Marie was lurking in the shadows, they don’t cash around just in case she goes on one of her escapades of looting. Some top people in the comic side of printing were let go a year or two ago at Quebecor, it’s not the same environment. I took a tour of the place and am not far from the actual comic printing plant.

    This whole thing is about a shining knight with money to bail them out with public money. Up here in Quebec things are a bit different, and Paul is right Quebecor is the crown jewel of the Quebec identity and it will not fall. Not to worry the shareholders will still get their money at the end of the day. Penny stocking is great for many.

  8. Wow. It’s friggin’ amazing what’s happened to the printing industry since I left. Lehigh Press, where I worked for 14 years (the loft in our NY sales office was otherwise known as the Friends of Lulu HQ), was bought out by World Color, and then apparently sold as it’s now a part of a company called Visant. (The NY office is now in the same building as DC Comics!) World was always The Competitor to Beat in the old days; interesting how that’s spun around now.

  9. Alan Coil says:

    More thanks to Paul Stock. Good for us Yanks to have more information about the situation.

    (Is Yanks still the term of derision from Canadians talking about Americans? Haven’t chatted with my Uncles in several years. Don’t know if it was them talking or the beers.)

Trackbacks

  1. […] The surging Canadian dollar, (aka “loonie) has put a major chink into anyone who’s in the business of putting ink on paper — Where comic books and romance novel printing north of the border is squeezing the margins so tight you can practically hear the cover models sigh. […]

  2. […] This story at The Beat about a week ago pondered the possibilities of bail out or bankruptcy, but we wonder no more. Quebecor filed for bankruptcy today. […]

  3. […] This story at The Beat about a week ago pondered the possibilities of bail out or bankruptcy, but we wonder no more. Quebecor filed for bankruptcy today. […]

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