What saved a chain of papers in Mexico is being tried at UPI
Mario V'azquez-Rana had asked 30 friends to meet him at the Madison Hotel in Washington, D.C., at 10 o'clock that September evening in 1985 to hear a business proposition. Mr. V'azquez-Rana, an extremely successful media magnate in Mexico, described to them a plan that would rescue an ailing United States business - United Press International.
UPI, which has served as a worldwide wire service since 1907, was in Chapter 11 bankruptcy proceedings. V'azquez-Rana felt the agency was too important to disappear and asked his associates to help save it.
``I arrived with a plan,'' he recalls, ``that if we were going to get it out of bankruptcy, we were going to have to invest. Let's strengthen UPI, make it stronger.''
The strategy sounded great except for a minor facet: ``What a lot of friends of mine didn't like was invest, reinvest, work, and not receive a salary for four years,'' he says. Because of this, he could not get them to sign on to the plan.
But Joe E. Russo, a Houston developer, was persuaded to put up 10 percent of the money for the floundering agency and V'azquez-Rana put up the rest. In early November, the two offered $41 million for the troubled wire service - and, after a short legal skirmish with another contender, their proposal was accepted.
As on that September night in Washington, V'azquez-Rana still has plans for UPI. In his first interview in three months, the new chief executive officer and president of UPI outlined how the wire service could pull out of the doldrums and again be profitable - something it has not managed to do since 1963.
V'azquez-Rana's business philosophy is rooted in the idea that he can work with people - and front the necessary cash - to make a nearly impossible plan work. He commonly takes on projects after others have failed, and to the surprise of many people he manages to pull off successes.
Until 1976, the closest V'azquez-Rana came to journalism was reading a newspaper. Before that, he and his three brothers owned Mexico's leading furniture company, Compan'ia Hermanos V'azquez.
``I was about to buy one of the strongest industries that produces refrigerators and stoves when [I discovered] this other business was bankrupt,'' he says.
A publishing company called El Sol, with a chain of 28 newspapers, was on the auction block in Mexico City. Four years earlier, the government had taken it over because of delinquent debts. ``But [having] newspapers in the hands of the government is a total failure, and circulation went down and down,'' he says. ``It was losing at that time something like $4 million a month.''
His purchase plan did not offer the most money, but it had a provision that made it stand out from the other 16 bidders: He would buy the El Sol chain and assume its nearly $80 million in debts. Eager to unload the organization, the government said, ``Where would we find a fool like this?,'' Mr. V'azquez-Rana recalls. The furniture king now owned a nearly defunct newspaper business.
First he wanted to see where $4 million was going every month, and he discovered a lot of unnecessary expenses. He then laid off 3,000 people who were not needed, computerized the newsroom and accounting department, and invested money to modernize the entire chain.
Seven months later, he had plugged most of the leaks and the chain stopped losing money. Eleven years since the purchase, he has expanded the empire to 62 newspapers, with the circulation of his flagship daily in Mexico City - El Sol de Mexico - hovering around 2 million copies. In many state capitals, his papers have trounced the competition. In addition, he has picked up radio and television stations throughout the nation.
Now V'azquez-Rana has UPI to convalesce, and he expects to rely on his El Sol training to help rekindle the organization. His private plane regularly shuttles from Mexico City to Washington.
His main objective is to maintain UPI subscribers by assuring them that the wire service can stay in business. ``There were many cancellations,'' he says. ``The last cancellations have been very strong and have been the ones that have shaken me up a little.''
He says the New York Times, for example, offered to continue using a portion of UPI, namely its sports coverage, photographs, and certain specialized services, but the newspaper also wanted to reduce its fees.
``I couldn't accept it,'' he says. ``Maybe in two years when I establish everything I would be able to accept that amount. I want to be very formal and serious [about prices].''
In the first seven months, V'azquez-Rana has saved about $7 million in expenses. If UPI had not lost those subscribers, it would be making money today, he says. The savings came in a variety of ways, the most important by automating functions such as accounting, which was still writing payroll checks by hand.
V'azquez-Rana knows the agency needs to attract new subscribers, but UPI cannot afford to let any others go. At times, he has taken on the public relations job himself.
For example, several US radio stations along the southern border which are UPI subscribers complained that transmissions from Mexico were interfering with their broadcasts. The stations asked if he could help.
He met with Mexican President Miguel de la Madrid and with a Cabinet minister. A short time later the transmissions from Mexico were adjusted.
Although he plans to focus more on the business side, V'azquez-Rana is interested in the editorial product.
``I do not interfere in the editorial section,'' he says. He does not get involved in the content, but he would like to see a small change in what is sent out. He believes ``50 percent'' of what wire services produce is junk. For UPI, he would like to see reporters write more in-depth stories and background pieces. To help meet this goal, UPI has hired experienced reporters from other publications, such as the Washington Post and Newsweek.
This spring UPI expects to introduce equipment that will feed each picture into a subscriber's computer. A photo editor could call up a particular photo on his terminal and lay it out on a page or print it. The process, which V'azquez-Rana describes as ``one of the saviors of UPI,'' allows photos to be stored in the computer instead of filing cabinets.