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Patriot: UMWA claim company 'walked out' on talks inaccurate

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Patriot Coal says allegations that it "walked out" of post-bankruptcy negotiations with the United Mine Workers of America are "inaccurate and distorted."

The company claims that the UMWA news release sent early on the evening of June 12 was the first it had heard that next week's negotiations had been canceled. The UMWA release claims Patriot canceled the talks, though the company said late Wednesday it plans to continue to try to reach a consensual agreement.

"The press release issued by the UMWA is inaccurate and distorted," said Patriot President and Chief Executive Officer Ben Hatfield. "Patriot has been working diligently with the UMWA in efforts to address their concerns about the contractual changes found to be necessary, fair and equitable by the Bankruptcy Court. If our goal was to force acceptance of the court-approved contract as is, no further discussions would have been necessary, as that option has been available to us since May 29."

Hatfield said Patriot could have simply continued without further negotiations with the union, but instead offered "millions of dollars in additional contract enhancements, including wage increases, healthcare improvements, life insurance, and paid personal time off."

The UMWA, in its release, says Patriot stopped the negotiations and said it would now let its members decide if they would be willing to work under court-approved terms.

"We are very disappointed by this action," said UMWA President Cecil E. Roberts in a statement issued Wednesday. "We had made significant progress toward reaching an agreement that provided a workable alternative to the severe terms Patriot asked for last spring and that were approved by the bankruptcy court in St. Louis. The union had agreed to more than $400 million in savings for the company over the life of the current contract, which gives them the money they say they need to survive. But that still wasn't enough for them."

Roberts said the company and the union were about $30 million to $35 million apart from reaching an agreement. The union claims a large chunk of that money is for management personnel bonuses. 

 After adjustments made to non-union employees, contracts and reserve utilization, the company had estimated it was about $150 million short of the annual savings it needed to emerge from bankruptcy.

Patriot claims the break in negotiations was requested by the union.

"The two-day recess in negotiations that the Company requested for the current week was needed for financial analysis of UMWA demands that Patriot roll back the majority of cost relief approved by the bankruptcy court," Hatfield said. "It remains the assessment of Patriot management that agreeing to the UMWA's demands would sacrifice any chance of making the company viable."

The UMWA, following a May 29 decision that allows Patriot to reject collective bargaining agreements and change retiree benefits, has said it is keeping the option to strike on the table.

"The company now says it will implement the terms and conditions approved by the judge, effective July 1," Roberts said. "I have consistently made it clear to management that I could not recommend to our membership that they work under those terms, because the sacrifices they require from our active and retired members are too great."

Analysts, the company and the bankruptcy court itself has all predicted a likely liquidation of the company should the UMWA strike.

"A strike would put the company on a path to liquidation, which is the worst possible outcome for UMWA employees and retirees. Patriot's unionized work force would be left with limited job opportunities in a difficult coal market, and our UMWA retirees would likely be left with zero healthcare coverage. ... It is critical that the UMWA agrees to continue productive negotiations if this devastating outcome is to be avoided."

The Court authorized Patriot to implement proposals that would adjust employee wages and benefits to a level consistent with the regional market, and transition retiree healthcare obligations to a VEBA. The VEBA would be funded with hundreds of millions of dollars, consisting of a 35% ownership stake in the reorganized company which the UMWA would monetize for a substantial cash contribution, an initial cash contribution of $15 million, 20 cents of royalty contributions for every ton of coal produced by Patriot and  profit-sharing payments. The UMWA has said that is not enough to guarantee the health of its members.

The union says that VEBA does not provide enough even with guaranteed funding of $15 million, a 20 cent-per-ton royalty and a 35 percent ownership stake. "There is no way of knowing what the level of that funding would be," the union states. 

The UMWA says that company is asking for $25 million more in management bonuses in each of the next three years while it cuts other member benefits. 

"We have repeatedly said that we are willing to make the sacrifices needed to keep this company operating," Roberts said. "We are working to preserve these jobs and preserve retiree health care. We also believe that those sacrifices should be shared by all, and that once the company gets through the short-term cash problem it has and begins to make money again in a few years, our sacrifices should be recognized." 

Patriot says its going above and beyond what is required by the courts.

"In these continuing discussions, Patriot has offered substantial improvements for our UMWA employees that result in a wage and benefit package that is clearly favorable to the regional labor market," Hatfield said. "However, we cannot support UMWA demands for changes in the court-approved contract that would increase Patriot losses by over $40 million per year in 2013, 2014, and 2015. If we did, Patriot would not emerge from bankruptcy."

Now, Roberts said the union will be explaining the terms and conditions Patriot plans to implement before July 1. Union members will vote whether they will work under the plan. 

The Patriot release says the company will, unlike the UMWA, be more sensitive to confidentiality surrounding the agreements "to make progress."

"Unlike the UMWA, we will not grandstand in the media or issue press releases filled with distortions about the parties' discussions," Hatfield said. "Rather than spending time on such theatrics, we are hopeful that the UMWA will return to the negotiating table and work toward a solution that allows Patriot to survive and continue to provide 4,000 jobs and meaningful healthcare benefits for thousands of retirees and their families." 

In the meantime, Roberts said the UMWA will continue an active fight against Peabody Energy, the company that spun-off Patriot in 2007, and Arch Coal, the company that sold some mines to a subsidiary later purchased by Patriot. The union has asserted that Patriot's given assets coupled with mass liabilities doomed the company to failure.