Financial Woes Rock Quebecor’s World —Michelson

Whatever the outcome, the company’s travails do seem to illustrate several truths:

Wall Street, customers and industry suppliers expect continuity from a senior management standpoint. The naming of current CFO Jacques Mallette to replace Wes Lucas reportedly marks the sixth person—including Pierre Karl Peladeau (son of the late founder) himself—to fill the CEO post at Quebecor World since Charles Cavell retired in 2003. A revolving door leading to the executive office shouts out the fact that a distressed company is unable to get back on track, and naming a new CEO, in most cases, does little to improve its predicament.

As a side note, due to the sheer size of Quebecor World, its financial woes are causing a ripple effect in the marketplace. With all of the bad publicity and subsequent concern by clients over its future, the printer reportedly has had to slash pricing in order to maintain existing business and to gain new contracts. This has intensified pricing pressures on its competitors—often in print markets already grappling with low margins, escalating paper prices and higher postage costs. Potential insolvency also impacts existing and future agreements for capital equipment upgrades and consumables expenditures.

Industry consolidation will continue, but combining large enterprises can create new pitfalls and surely does not guarantee success. It’s been often said that making an M&A transaction is the easy part; the hard part is integrating various operations and melding different cultures, i.e., Quebecor with World Color, on a grand scale. Over these past several years, Quebecor World has been dogged by several inefficient facilities with outdated equipment, labor unrest within its European operations and falling stock prices.

Quebecor’s printing unit dates back more than 50 years and has been an integral part of the company’s overall success. The overriding question: Will the parent come to the rescue of its foundering child, or let business be business and take down the shingle?