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The UMW can get something out of Patriot

It's possible, if not probable, that the fate of Patriot Coal was determined on Oct. 31, 2007. That's the day Peabody Coal created Patriot out of subsidiaries.

Patriot ended up with 11 percent of Peabody's assets, but 42 percent of the liabilities. In real numbers, Peabody's retiree health care liabilities fell by over 70 percent to $239 million.

Good deal for Peabody, bad deal for everyone else.

Patriot's creation was followed by an economic slowdown, a switch by many electricity power producers from coal to natural gas, and a regulatory approach by the EPA hostile to coal.

Meanwhile, Patriot bought Magnum Coal from Arch Coal, and once again, long-term liabilities of retirees, spouses and widows were shifted to Patriot.

All of that led Patriot, predictably, to bankruptcy court, in an attempt to restructure its contract with the United Mine Workers Union, save money, and get back on its feet.

Naturally, the union resisted. Rollbacks are antithetical to what the UMWA considers hard-won wages and benefits for dangerous, backbreaking work. UMWA President Cecil Roberts is particularly sensitive to the health care needs of aging retirees.

However, Judge Kathy Surratt-States concluded that without some relief, Patriot would be forced into liquidation.

"This, by all accounts, is the worst scenario," the judge said.

So the judge concluded the best way forward is a plan by Patriot to reduce wages and benefits for the company's 1,700 union miners. Another part of the proposal creates a trust to be funded by Patriot, profit-sharing, and royalty payments to cover approximately 8,100 retirees.

The union points out, justifiably, that 90 percent of the retirees never worked for Patriot, so they have a hard time understanding how that company's bankruptcy impacts their benefits.

However, as the judge recognized, "Unions generally try to bargain for the best deal for their members, however, there is some likely responsibility to be absorbed for demanding benefits that the employer cannot realistically fund in perpetuity."

While the bankruptcy proceedings have been going on, the union and Patriot have been trying to negotiate a revised contract, and those discussions continue, despite the judge's decision.

However, the court ruling greatly diminished the union's bargaining position.

The UMWA has left open the possibility of a strike, a move Judge Surratt-States says would be a mistake.

"All evaluating this matter can see that a strike, or more importantly, (Patriot's) liquidation caused by a strike, is a zero sum proposition."

Interestingly, the UMWA and Patriot are united by a common enemy - Peabody. They hold Peabody responsible for setting up a company to fail, and they want a court to force Peabody to pick up some of the legacy costs.

Who knows if that will happen?

In the meantime, however, Patriot needs to pay its bills and try to reorganize so it can stay in business. The union needs to provide some certainty for its retirees and members who work for Patriot.

The UMWA is understandably angry it did not get a more favorable decision.

But as Judge Surratt-States concluded:

"The court is faced with this cheerless and rather doleful question: What is better?  Something for a time or nothing for a short time? Half a loaf or no loaf at all? There are no pre-bankruptcy options."

Kercheval is host of TalkLine, broadcast by the MetroNews Statewide Radio Network from 10 a.m. to noon Monday through Friday. The show can be heard locally on WCHS 580 AM.


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