Guardian Media Group CEO Carolyn McCall says further upcoming restructuring “inevitably means we will be a smaller organisation,” even after the gloom of the advertising downturn clears.

In a staff memo, clarifying weekend reports about The Observer’s future, McCall says a three-year plan is under development that “is examining every aspect of GNM’s publishing strategy and titles: the Guardian, Observer and guardian.co.uk; print and digital”: “When the economy recovers, so – to a degree – will our advertising revenues. However, due to structural change, these revenues will not be at the levels they were in the past. GNM’s costs will need to reflect this if losses are to be kept within sustainable limits.”

She went on to say: “The work described above, which involves Alan Rusbridger, Emily Bell and John Mulholland, is ongoing. It is far too early to say what its outcome will be. I know this uncertainty is very difficult for staff, but the Trust, GMG and GNM are not about to do anything ill-considered or hasty.” Results of “initial work” on the review are due in the autumn.

Guardian News & Media had already gone through some structural tinkering before the downturn hit, thrashing out new deals with editorial staff to integrate newsroom operations of The Guardian, Guardian.co.uk and The Observer. In recent months, there have also been layoffs in GMG Regional Media and from GNM’s editorial and commercial teams.

GMG last week said it swung to a £89.8 million annual loss for 2008/09. While the downturn is partly to blame, McCall also attributes the swing to earlier restructuring costs, which in part mean profits from Trader Media Group and Emap—its joint ownerships with Apax—aren’t reflected on its balance sheet. GMG has a variety of media interests, but its key mission is to ensure the “security and editorial freedom of the Guardian in perpetuity,” as dictated by the Scott Trust, which is GMG’s sole shareholder. For that reason, whatever happens to the Observer or GMG’‘s other units, the Guardian isn’t likely to disappear anytime soon. 

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• Observer In Spotlight As GMG Wrestles With Downturn