Pot-boiler at Penguin

Morale is low at the publisher but Patrick Hosking is told to expect a bright new chapter

PETER MAYER, chairman and chief executive of the worldwide Penguin publishing group, is no stranger to confrontation. In his 20s he worked part-time as a New York cab driver. So a small demo by his bookish employees is unlikely to faze him.

Even so, industrial action in the book trade is virtually unheard of. What can he have done to prompt his employees to wave placards outside their London offices in well-heeled Kensington last month?

The answer is simple. He sacked more than 100 of them. Penguin UK, hit by sharply falling revenues, has had to pull in its horns. There have been some high-profile departures too: Trevor Glover, the UK managing director, was ousted in November and American-based Mayer is temporarily filling in for him, hopping back and forth across the Atlantic.

Fanny Blake, editorial director, who published William Boyd's first novel, A Good Man in Africa, left amid a welter of acrimony. Staff morale at the company, part of the Pearson media group, is at rock-bottom.

Mayer, jet-lagged and smoking in his book-swamped office, responds: "Was there ever a company that had to cut costs and lose staff that was totally happy? It's understandable."

The worst is already over, he says. "We don't plan any further redundancies. We are planning revenue increases."

Penguin's worldwide contribution to Pearson profits collapsed at the half year from pounds 3.3m to pounds 1.5m and the full-year contribution is expected to be sharply down on last year's record pounds 40m.

Mayer insists that Penguin is in rude health outside the UK. In Britain, however, he blames a lack of consumer confidence, uncertainty caused by the demise of the trade's price-fixing arrangement, the Net Book Agreement, higher paper costs and the collapse of the bookselling group Pentos.

He denies that the cheap and highly successful classics series put out by the rival Wordsworth group caught Penguin on the hop. "We weren't slow to respond. We decided not to respond and we were wrong. We thought that given our classics list was 14,000 titles deep and of the highest standard, that was a strong enough franchise, and that Wordsworth cherry-picking the biggest titles would be a temporary force and would go away. It didn't, so we responded and we responded brilliantly."

Penguin brought out its own discounted classics range. "It didn't hit us financially," insists Mayer. "We made as much profit as before. We sold 8 million additional books."

The Penguin 60s series of mini-books has been a sensation in sales volume terms. Penguin has sold 12 million of them in the UK and 19.5 million worldwide. Each book makes 8-12p in profit before overheads depending on royalties, says Mayer who, with editor-in-chief Peter Carson, came up with the idea last spring. But he admits that the range has reduced demand for Penguin's fully priced conventional titles.

Pat Barker, whose The Ghost Road won the 1995 Booker prize, has also helped swell Penguin revenues. Even so, the company desperately needs to boost income more if it is to justify its still substantial UK costs - it employs about 700 in the UK.

Mayer has great hopes for The Green Mile, Stephen King's new novel, which he plans to publish in six separate pounds 1.99 issues over a period of months. He denies this is a shameless gimmick: "It's going back to Dickens and Dostoyevsky [whose novels were published in serial format]. It's a promotion designed to find new readers. We look to be very much more innovative in the future."

That also means being more nimble: Penguin brought out Ken Saro-Wiwa's autobiography just eight days after his execution.

Penguin is also dipping a toe in the CD-Rom market. It expects to sell 2,000 copies of its first product, Rock 'n' Rom, a reference work on rock music priced at pounds 999. The development costs were just pounds 70,000. "We're on the look-out for other winners," he says.

Whatever the outcome for Mayer, who is already credited with turning round Penguin in the 1970s, he need never drive a cab again. According to the latest accounts, he owns 305,000 Pearson shares worth pounds 1.92m.