Bennett Hatfield: Patriot Coal wants to save 4,000 jobs
IN the months ahead, Patriot Coal will go in one of two directions:
Either the company will obtain the significant cost reductions it needs to survive, or it will face the very likely possibility of liquidation.
That would result in the loss of thousands of good jobs and have a devastating economic impact for our communities and the families of our employees and retirees.
Much has been said and written about Patriot's recent proposal to employees and retirees represented by the United Mine Workers of America, including numerous unfounded allegations, inflammatory personal attacks and factual inaccuracies.
The truth is that the company's proposal was driven not by corporate greed, immorality or some desire to break longstanding promises, but rather by the recognition that Patriot simply cannot emerge from bankruptcy unless and until it obtains the cash savings necessary for Patriot to remain viable.
Patriot filed for bankruptcy last July as a result of one the sharpest coal market declines in decades, increasing regulatory and environmental cost burdens, and unsustainable payments for legacy obligations.
Since then, the reorganization process has required Patriot to make many difficult decisions to achieve the savings necessary to remain viable. The company has undertaken mine closures, workforce reductions, contract rejections and modifications, capital expenditure cuts and significant compensation and benefit reductions for our salary and non-union employees.
Efforts to secure savings from our non-union employees - who constitute about 60 percent of Patriot's total workforce - began before and continued after the start of negotiations with the UMWA.
The UMWA is now being asked to do its fair share to help Patriot survive.
Contrary to what has been reported in the media, Patriot's proposal to the UMWA does not aim to "throw out" our collective bargaining agreements.
We seek only to modify union employees' wages and benefits so they are in line with the regional labor markets and with non-represented workers who do the same jobs at other Patriot operations.
It is also important to note that Patriot is not proposing to eliminate health care or pensions for UMWA retirees. Rather, its proposal allows for continued health care coverage for union retirees at a level that Patriot can afford.
Patriot has proposed to establish a voluntary employees' beneficiary association - or VEBA - trust that would be administered by the UMWA or the UMWA Health and Retirement Funds.
The VEBA trust would receive funding from Patriot through a significant ownership stake in the reorganized company, which could be worth hundreds of millions of dollars, as well as profit-sharing contributions by Patriot of up to $300 million, an initial cash contribution of $15 million, and future recoveries from litigation.
In addition, Coal Act and Black Lung beneficiaries will continue to receive their current benefits with no changes whatsoever.
And, while Patriot has proposed to withdraw from the 1974 UMWA Pension Plan, that action will have no effect on current pension benefits under that plan.
Since November, we have engaged in good-faith negotiations with the UMWA to try to reach common ground. Our current proposals reflect several improvements as a result of those discussions, and we continue to work toward a consensual resolution with the UMWA.
However, as there is no assurance that we can reach a consensual agreement within a timeframe that avoids severe disruption to our business, Patriot has recently asked the bankruptcy court for relief by filing a motion to request these necessary changes without the consent of the UMWA.
The recent liquidation of Hostess Brands, following a devastating strike, demonstrates what can happen when labor concessions cannot be successfully obtained during bankruptcy. We must find a way to avoid this outcome.
Our efforts also include steps to hold Peabody Energy accountable for its actions and obligations. In March, Patriot filed a lawsuit against Peabody in an effort to ensure that Peabody will continue to fund its obligations to certain retirees in full.
We are also continuing to investigate other potential claims against Peabody and others with the support and assistance of the Unsecured Creditors' Committee and the UMWA.
While it is unfortunate that some have attempted to distort or provide misinformation about our company's goals and actions, Patriot is committed to making the changes necessary to emerge as a viable entity for the benefit of all stakeholders, while saving more than 4,000 jobs.
Failing to make any changes in UMWA employee costs and retiree medical coverage, as many uninformed critics are advocating, would simply force the company into liquidation - and that is the worst possible outcome for retirees, employees and the communities in which we operate.
Hatfield is president and chief executive officer of Patriot Coal.