ST. LOUIS -- Patriot Coal Corp. said Monday it needs to cut retiree benefits now or run out of money in early 2014, pitting the bankrupt coal producer's survival against health care and pensions for 13,000 retired miners and their families.
Patriot will have to liquidate if it doesn't come up with a way to save another $150 million a year, the company's lawyers told U.S. Bankruptcy Judge Kathy Surratt-States in St. Louis Monday. The company seeks approval of a plan to change agreements with unions following 12 rounds of negotiations.
"If we don't get relief we are headed for catastrophic circumstances," Elliot Moskowitz, a Patriot lawyer, said in court. "Without relief we will be forced to liquidate early next year."
The United Mine Workers of America, or UMWA, which represents about 42 percent of Patriot's 4,000 employees, says the proposal still isn't good enough and seeks changes that are only necessary because of the company's self-imposed liquidity and earnings targets. The proposal would strip 13,000 retirees of benefits earned in decades of collective bargaining, reversing programs first implemented after President Harry S. Truman seized U.S. coal mines in 1946, the union said.
Patriot filed for bankruptcy in July, citing falling demand for coal and obligations to pay $1.6 billion in lifetime health care for its 8,100 retirees. At the time, St. Louis-based Patriot already had been negotiating with the UMWA for four months. It has since submitted four new proposals, each one with more concessions, the company said.
From the outset of the case, hundreds of letters have poured in from retirees pleading with the courts not to end their health care.
"I worked underground and with heavy equipment for 34 years," William Persinger wrote in an October letter filed in court documents. "As many coal miners our health is poor, we are at the age we need our medical insurance very bad. Many others that depend on the insurance will die if we lose it."
Patriot's latest proposal revolves around the creation of a voluntary employees' beneficiary association, or VEBA trust, to be funded by a 35 percent equity stake in the reorganized company and royalties from every ton of coal produced at its mining complexes.
Patriot says it can't afford to provide unionized miners with wages as much as 90 percent higher than those of non-union miners, as well as health care coverage and perks such as 47 days of paid time off a year, according to court papers. Patriot already has court approval to reduce obligations to non-union workers.
The UMWA says Patriot has failed to show the cuts are necessary enough to overcome laws intended to prevent companies from using bankruptcy to break unions.
Patriot is using bankruptcy "to eliminate the past gains of these unionized miners, who historically sacrificed hourly compensation and pensions for retiree health care," the UMWA said in court papers. After World War II, the UMWA went on strike to seek national multi-employer health care for its retirees. The union won an agreement after Truman seized the country's coal mines and ordered the Secretary of the Interior to negotiate with the UMWA.