Tony Galasso, president of Quebecor World Canada and Premedia North America.

By Jon Robinson

PrintAction magazine spoke with Quebecor World’s president of Canadian operations, Tony Galasso, hours after the company announced its worsening financial situation to the press.

The world's second-largest commercial printer was planning to take a $232-million non-cash charge in the fourth quarter (results are due in mid-February). Over the past year, the company’s share price has fallen by about 41 percent.

Quebecor World (QW) is cutting its quarterly dividend by 28 percent to 10 cents a share, which will reduce cash payments by $21-million on an annualized basis. This move is in part driven by the $87 million spent to retool its European operations at the end of 2005, which is a piece of a much larger 3-year, capital investment program for North America. The share restructuring helps QW maintain liquidity to put its plan in place.

As PrintAction spoke with Galasso, he was finalizing the budget he would present the following week at a Quebecor World retreat in the Laurentians. The company’s worldwide presidents – from Latin America, Europe and North America – were invited to the home of Quebecor’s late founder, Pierre Peladeau. His sons, Pierre Karl and Erik, who now run the parent company, have kept the Sainte Adèle house in working condition, although it remains empty most of the year.

Pierre Péladeau would often call his top executives to Sainte Adèle to decide critical issues, something that both Pierre Karl and Erik would have been witness to when they were old enough. The symbolism of the late-January 2006 retreat is not lost on Galasso, who will provide his opinion as the Canadian president as well as the president of Premedia North American.

Jon Robinson: Do people underestimate the leadership of Pierre Karl Péladeau?
Tony Galasso: I think he is underestimated. I think he is just the most stimulating boss that I have ever had in my life. I report to him directly. And I have worked with Rémi Marcoux. I know Luc Desjardins well. I’ve worked for Jim Smith at Domtar and Ray Pinard and all those guys who are pretty significant heavyweights in the printing and packaging industries. This guy truly has driven the best out of me in terms of exceeding my own expectations.

He spooks people when you first meet him and, unfortunately, most people just get to have those surface-type meetings. He doesn’t let people into his world very easily but he is just someone who wants to win and he is very aggressive about it. I would go right to the end of the road with him because he is that kind of guy. I think the story will conclude that we pull out of this in a way that coincides with being the best in North America.

How has your mandate changed after QW recently finalized the sale of its sheetfed facilities, including six to Aivars Beikmanis’ Grafikom group?
Aivars was very autonomous at the time and ran the business very successfully. With the size we were at, we didn’t have the day-to-day patience to work through the challenges of sheetfed and the short-run digital environments of print/pack. While I was trying to negotiate and establish a large web platform, the whole distraction of sheetfed always weighed heavy. Our challenge is in magazine, retail, catalogue, directory and book [printing] in Canada, in upgrading and becoming the lowest-cost producer within that web world.

Why is QW intent on the web-offset world when most of the industry is moving toward shorter runs?
There is a lot happening even within longer-run type publications like flyers, catalogues and magazines. There is a lot of new equipment from what I am seeing. What we have on the drawing board from the manufacturers will allow us to work in an even shorter run, more targeted type of versioning environment. Always web. We will be the dominating web player in Canada in terms of where we are heading with the divesture of the specialty group and the focus in our retooling program in both Canada and the U.S.

How much of the upcoming spending is going to be applied to Canadian operations?
A significant amount, more than we have seen historically. It has not been approved by the board, in terms of the exact retooling specifics. It is sort of all happening next week with both Pierre Karl and Erik [Péladeau]. It is really a neat experience because you are going through press-line by press-line on a worldwide basis. How do we re-deploy some of the existing equipment in what we call the Tier A?

What about the bindery, which is attracting more attention these days?
At the risk of sounding a little cruel, the costs of temporary labour within our binderies across Canada and the U.S. is in need of becoming more competitive. There is so much cost that we can take out in labour and that is really important to address within the context of the overall plan.

What is QW’s Canadian plan for book printing?
That is an area where we feel very comfortable because of our experience in the U.S. and in Latin America, where we are dominant players. So we feel this should be a growth area in Canada. There are niches. I am not suggesting that retail is not a niche, but certainly I do not underestimate our competition’s platforms because they are doing a great job upgrading as well. Our goal is to be the lowest-cost producer.

What are some of the major challenges when it comes to printing inputs?
You just have to talk about utilities and the hair on the back of my neck stand up. That in of itself is a big enough nut to crack. The web side obviously with heat-set and gas. Gas is the real killer. There is hydro and electricity, but gas has just been a challenge for us to overcome. Next week at this retreat we are actually putting a plan together, a little late in my mind, but certainly one that will help us going forward in establishing direct contact with the utility companies.

BC Hydro, for example, has the capital necessary to support industry in approving consumption for manufacturing and converting companies. They call them e-points, for electrical points, I guess, and if you get a bill for $10,000 and you get 2,000 e-points, well, your bill is really $8,000. That kind of connectively, even though it is very specific and very local in the BC market, is something that I am going in and securing for Canada.

QW has faced some personnel turbulence over the past two years. How is the situation today and who internally are emerging as leaders?
The number-one thing that we have always said about our Canadian group is that we really have the best management team that I have ever worked with. I spent 10 years at the competition [Transcontinental], and now a little over 10 years at Quebecor, and the quality of individuals that we have is just superb. The group truly has come together. The team, I think, is one of our greatest achievements.

Tim Boissinot is a really key guy who runs Ontario, you have Richard Tremblay in Quebec and Marco Drouin in Western Canada and there are the operators who run the plants. There are tremendously talented people who have put this manufacturing plan together. That is the most exciting part. It is commitment from head office, from Pierre Karl, to invest $400 million a year on a worldwide basis, and having the financing and liquidity to do it is exciting.

This retooling needs a strong premedia infrastructure, so why has Que-Net Media all but disappeared?
The Que-Net name is very much part of our organization and the premedia group was handed over to me, I guess four months ago, in order to reposition the existing facilities within a North American strategy. It is very much at the early stages but we are creating a model that is quite clear in my mind. We are investing heavily within the capital plan to retool our servers, our proofing, our workstations, truly upgrading – after five years now – the ability for convergence.

We will drive efficiency in providing every single Quebecor facility with what we call clean PDF files, so that they can just prep, makeready and run as fast as they can on that press. If I can get this in place by the end of 2006 I will have achieved one of the fundamental action items for premedia.

Why convergence, which has certainly fallen out of vogue since the dotcom bust?
We truly are developing the first layer of a very solid convergence model. We are the only media company that has a back store the size of Quebecor World. We can reach the consumer touch points that are evolving every day. We are buying more newspapers. We are developing our broadcast side, our [World Wide] Web reach and integration is improving. Our portal called Canoe is getting better. Our cable company is expanding and, although it is very regional, there are other plans for expansion.

Why did Quebecor invest in Nurun?
The other area for premedia is the whole customer technology side. One thing I had done early on was assemble a team of programmers to develop our own automated publishing and campaign management solutions. We did work, prior to owning Nurun, back in the late ’90s. We were already designing and programming our own software but I think, now with the addition of Nurun, we are poised for worldwide deployment of customer technology solutions in managing all aspects of the content that goes into a printed pieced and goes into a web page and goes into any digital environment that the world will create for us. It all starts with the vision of a printer to believe that you need to have connectivity with designing software that helps the production and proof workflow at the customer’s level, the ability to make changes to your content right up until press time. We haven’t communicated that to the marketplace, how powerful that is in our own company. It really happens within the QW and Nurun relationship.

How then does Que-Net fit?
Some of the other stuff that is really interesting for premedia, which we have been successful with in Toronto, is the whole design and creative side, or the studio side. We have had tremendous success with retailers and cataloguers in developing design and creative for not only exciting print products like fliers but also new – I guess you would call them – product extensions.

This is what [Que-Net] originally was in terms of its mandate and for some reason we sort of lost our way there. Somewhere around 2002 I took on the group president role for Canada and I said, ‘You know, we just have to jump start the Que-Net thing again because you have so much value when you are upstream.’ You are actually talking strategy with the customer. What the program should look like. What the format should be. What about product extensions? How do you segment the flier even further?

What about facilities management?
That is another phenomenon that is happening. It has not been as successfully applied in Canada, but, in discovering the U.S. premedia side, I see this as a big opportunity in Canada, as well. We have tremendous relationships with Disney World and ESPN and Forbes magazine in the U.S. We are directly in the Forbes building on the south side of New York and we have exclusively put a team together for building their publications. This is a Que-Net business and we are there, on a 7-day/24-hour basis just pounding out pages for them, helping them with design, and it is amazing how that model – okay, here I will go back to being a little mercantile again – is so profitable. And that is what we are here for.

Instead of setting up more Que-Net standalone facilities, will you then be focusing only on facilities management?
In parallel to maintaining the shops that we have, because they are still – on a percentage basis – the most profitable division we have in this entire company. It was a real pleasure for me to take it over, because I am able to build on some very strong foundations.

But yes, as an extension of the existing foundations of these fully owned businesses that we operate in our own buildings and our plants, I see the dream of having a facilities management model set up with our strategic partners everywhere we can.

Relative to the parent company’s international printing assets, QW Canada is in an interesting position because Quebecor owns Canadian media. How do you plan to take advantage of this?
You can leverage all of that as a customer. We are starting to get attention and we are starting to execute that in the marketplace with some of our major partners in retail and catalogue, specifically, because they need to find different ways of getting their message out. But even more importantly, they want the message to be consistent from every one of the mediums. The offline printed medium is just as important as the web or the TV spot or the radio spot. We are training ourselves, as executives, to understand that.

Pierre Karl said to me, ‘Tony you have to raise your game. You can’t just be a printer anymore. You have to understand the Quebecor Media company.’ The day he told me that, about a year ago, I said, ‘Then I am going to every single one of your management meetings.’ And we put Quebecor World on the agenda every month with Pierre Francoeur, the guys at Nurun with Jacques-Hervé. There are a whole slew of these guys and it is such an interesting world.