SAN FRANCISCO -- The Giants handed Brian Sabean a new contract to remain as their general manager Friday. Then they handed him a hard hat.

Sabean signed a two-year deal with a club option for 2010 to rebuild a franchise that has fallen into disrepair around an aging Barry Bonds. Financial terms were not disclosed.

For the first time in a decade, Giants upper management acknowledged the club faces a rebuilding effort. And managing partner Peter Magowan said he would be willing to tolerate losing in 2008 as the team develops younger talent.

"If I have to, the answer is yes," Magowan said. "The hope, particularly with our team that depends so much on our fine young pitchers, is that we can surprise ourselves. But if we need to develop patience to sustain winning in a few years, we're prepared to do that.

"I don't want anyone to think we don't want to win in '08. We do. But it will be a different philosophy, a different emphasis than has been the case the last several years."

Sabean said he and Magowan began discussing an extension a week ago, when the two men started hatching plans for the trade deadline and beyond. Sabean said he pushed the discussions along because he has strong personal ties in San Francisco and didn't want to leave.

"That heightened my sense of urgency," he said.

Said Magowan: "By making the decision now, it puts Brian in a much better position to do what he feels he needs to do in terms of making trades and making assessments. We can get a running start on the '08 season by making these moves now."

A fire sale is expected soon, but Sabean cautioned he isn't returning to run the Giants like an expansion franchise.

"We like winning," Sabean said. "I didn't stay here to rebuild to go through years to turn it around. Whether we can remains to be seen, but that's the focus."

Sabean's first task will be a complete organizational review to determine how the club can more efficiently allocate funds and personnel. He didn't indicate he would conduct a housecleaning of his department, though.

The roster is another matter. The Giants are expected to move several veterans, both to free themselves of future payroll commitments and to open spots for younger players such as Fred Lewis and Kevin Frandsen.

Asked how much longer before he would start to move veterans, Sabean pointed to the July 31 trade deadline.

"Within the next run of games, obviously," Sabean said. "From now until the deadline, every series is a big series."

One of the chief criticisms of Sabean's tenure is the Giants' failure to produce position players. Sabean and Magowan acknowledged the club needs to add young hitters, perhaps scanning the trade market for them instead of acquiring rental players.

"If you look at teams like Los Angeles, San Diego, Atlanta, even the New York Mets, in all those lineups there's a good blend of players developed by the system and free-agent players," Magowan said. "We don't have that kind of balance on our team. We've got to strive to get a better one in the future."

Yet Magowan said the farm system under Sabean has been "overly maligned," pointing out the many pitchers on major league rosters that began in the Giants organization.

"We've emphasized pitching for a good reason," Magowan said. "It takes less time to develop college pitchers than position players, and pitching is highly valued on the trade market.

"There's 24 other players on major league rosters developed by Giants, and 21 are pitchers. We need to strive for better balance overall, but that would rank us seventh out of 30 teams. That is a chief way of evaluating your general manager. I don't think the organization has been given any credit for that."

Sabean agreed, saying his reputation for favoring established players is unfounded.

"It's extremely unfair," Sabean said. "The formula certainly backfired, but I'm not going to apologize for trying to put the best team on the field."

Ultimately, Magowan said that Sabean was the right person to lead the Giants into the post-Bonds era.

"When you look at Brian's body of work over his 11 seasons with the Giants, it's evident that he is a shrewd baseball man who will find a way to get this team back to where we all want it to be," Magowan said.

Contact Andrew Baggarly at abaggarly@mercurynews.com.