The Age and The Sydney Morning Herald are preparing for a wave of industrial action after new Fairfax CEO Greg Hywood wielded the axe this morning, sacking over 100 production staff to achieve annual cost savings of $15 million under the cover of an announcement spruiking “quality journalism”.

Newsrooms in Melbourne and Sydney were rocked when the horror news came through from Hywood shortly after 10am that sub-editors from Fairfax’s metropolitan titles would be hived off and replaced by Pagemasters contractors across three capital cities.

Fairfax currently outsources much of its sections content to the AAP subsidiary, but news, sport and business has remained in-house to prevent egregious errors and maintain the company’s teetering credibility with readers. Hywood said the redundancies will end up costing $25 million over the next eight weeks.

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As Crikey went to print, irate Sydney Morning Herald staff were in a tense meeting with Hywood, metro chief Jack Matthews, SMH publisher Peter Fray and editor Amanda Wilson, who it’s understood was in tears. A planned net annual saving of $3 million from the Herald editorial budget was flagged, which some suggest was a questionable outcome from an operation turning a net profit of $2.2 million a week.

At The Age, reporters preparing for today’s Victorian state budget lockup were pondering whether they would bother filing any copy at all for the paper, leaving Hywood and Matthews to write and sub the paper themselves. A stop work meeting is planned for 4pm.

“You’d have to expect an almighty shitfight. It’s beyond belief, we didn’t see this coming at all,” said one senior Age editorial staffer.

They foreshadowed an outpouring of vitriol on the steps of Media House: “There is a lot of anger here, and on the newsroom floor there’s talk of a strike.”

Crikey understands The Age currently employs 72 full-time subeditors. Of those, 45 will be given their marching orders with some lucky layout subs apparently avoiding the chop. The Herald and the Sun-Herald will lose 40 subs and gain around 15 reporters, five whom will be senior. There is currently no indication on the number of new hires on The Age.

Last week, at farewell drinks for the SMH‘s chief subeditor Tim Vaughan, the legendary figure foreshadowed the move, slamming the company that is about to receive a massive financial windfall from Fairfax as “Pagef-ckers”.

The announcement of the sackings came as the ailing media giant issued a profit warning highlighting continuing soft revenue growth as its share price tanked by 9%.

Fairfax said earnings before interest, tax, depreciation and amortisation (EBITDA) would fall about 6% to $600 million this financial year, down from $639.1 million previously. Second-half revenue was down 4.5% from a year ago, while costs for the period were up 1%.

Subeditors contacted by Crikey were unaware of either announcement, with many yet to clock on for the day’s work. Fairfax blamed the timing on the fact the information was “market sensitive”, however the deal had been worked on for weeks, according to internal Pagemasters emails obtained by Crikey.

“There are clusters of reporters shocked and appalled at the gutless announcement while subs aren’t here,” said senior Age staffer. “Why would subs even bother coming to work? Reporters who liaise with subs for layout and word subbing don’t want to deal with a faceless person in Botswana or Bombay, or wherever they are based.

“How embarrassing for a daily broadsheet. Why not outsource everything and make it a virtual newspaper?”

Media Entertainment and Arts Alliance federal secretary Chris Warren was similarly scathing, noting the decision would lead to the loss of “hundreds” of jobs.

“The Media Alliance is disappointed by the company’s decision to renege on its commitment to quality, independent journalism,” he said. “At a time when Fairfax is looking to invest in the future of quality journalism and the development of market-leading cross-platform news content, taking the specialised skills and expertise of subeditors out of the newsroom is grossly misguided.

“Not only will it impact on the quality of all Fairfax products and compromise the ability of newspapers to quickly respond to breaking events, the contracting out of subediting work will diminish the local knowledge so important to the quality of our local newspapers.

“This decision ultimately means less specialised, local and professional journalism from one of Australia’s largest media companies.”

Hywood buried this morning’s announcement in an email to staff that began with claims he was about to increase the company’s investment in “quality, independent journalism”. He said the changes were “logic-driven”:

“To achieve this we are restructuring the way we produce our newspapers.”New workflow and work practices will be introduced which will not only facilitate the investment in journalism, but will underpin quality…

“As you will be aware, Pagemasters has been successfully producing many of the sections for our metro mastheads for the past three years…

“This is not an unprecedented decision. Pagemasters and other independent production houses now produce many high-quality newspapers around the world.”

In a separate communique, Matthews, the recently appointed tsar of Fairfax’s metro operations, echoed his boss’ sentiments but admitted the “tough choices”, while right from a strategic standpoint, would “have an impact on people currently in the business”.

“We know we cannot simply cut our way to success,” he wrote. “We must focus on a path to sustainable growth that will deliver Fairfax a strong future…” The ex-digital boss said he had recently traveled to the US and UK to observe the carnage cause by a failure to slash and burn before profits plummeted.

Matthews said he had “processes in place” to ensure the paper didn’t turn up with spelling and syntax snafus and that new “outsource centres” would be established in Sydney and Melbourne.

Elsewhere , Hywood made repeated references to a greater investment in writers and journalism at the Sydney Morning Herald, The Sun-Herald, The Age, The Sunday Age and The Canberra Times, stoking suggestions that ex-Telegraph editor and keen scribe Garry Linnell would soon be hired as an expert correspondent. While there was no official specifics on numbers, it seems the neglected Fairfax trainee program will be revived from its current single-digits status.

Hywood, a once-popular former Australian Financial Review editor, said efficiency gains would also be realised from New Zealand operation and through a rationalisation of the company’s printing and distribution operations, presumably in league with News Limited.

Hywood told Crikey this morning he “was in a meeting” and “couldn’t talk” when further details were sought.

The market was also unforthcoming: as Crikey‘s deadline approached, Fairfax shares had tumbled by nearly 9%, or 11.5 cents, to $1.19 against a 1% fall in the broader index.

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