Push just came to shove at the LA Times, in a matter of speaking, with Tribune Company chairman and CEO Sam Zell coming down squarely on the business side in the dispute between publisher David Hiller and departed editor Jim O’Shea. From Zell’s email to LA staff (courtesy of LAObserved): “With all of the media coverage and speculation Jim O’Shea’s departure is generating, I wanted to take the opportunity to reiterate what I’ve been saying since becoming chairman. I’ve said loud and clear that I am returning control of our businesses to the people who run them. That means David Hiller has my full support. He carries direct responsibility for the staffing and financial success of the LA Times.” That should be clear enough to everyone—editorial has as much power as business wants it to have and there are no courts of last resort. It also puts a target on Hiller, who will also bear responsibility for failure.

O’Shea says he was fired; Hiller says they agreed to part ways, which is the spin Zell picks up. LAObserved also has O’Shea’s farewell memo, in which he speaks pragmatically about tough times and budgets cuts: “I am not some naïve, starry-eyed journalist who can’t accept economic reality. I know you have to cut back in hard times. I’ve done that more often than I care to mention. ... One thing I want put on the record, though, is that I disagree completely with the way that this company allocates resources to its newsrooms, not just here but at Tribune newspapers all around the country. That system is at the core of my disagreements with David. I think the current system relies too heavily on voodoo economics and not enough on the creativity and resourcefulness of journalists.”

He also makes a point about Zell: “I believe that when Sam Zell understands how asinine the current budgetary system is, he will change it for the better, because he is a smart businessman and he understands the value of wise investment. A dollar’s worth of smart investment is worth far more than a barrel of budget cuts.”

Interactive gains: O’Shea: “Despite those cutbacks, we successfully transformed this place into a true interactive newsroom with a web site that is far more successful than when I came. In fact, traffic on LA Times.com was up by a staggering 187 million page views over December 2006, an extraordinary achievement and one that should generate pride in our ranks.”

Update: WSJ: Hiller asked for the equivalent of a $7 million cut—$3 million in newsprint costs and $4 million from other parts of the $120 million budget to cover the space and resource costs of election and Olympics coverage. Hiller: “They were proposing an increase in a year when, like all newspapers, revenue was down dramatically. The idea that a newsroom budget would be increased was regrettably totally unrealistic.” O’Shea said it was the amount that got him, it was the process: “If you don’t invest in good, solid, accurate, fundamental journalism, you are going to just continue the decline and fall.”