The Times West Virginian

West Virginia

July 3, 2013

Patriot imposes benefit, wage cuts

Coal company says cuts less severe than they could have been

ST. LOUIS — A bankrupt coal producer said Tuesday that it imposed less severe wage and benefit cuts on its miners than it could have under a court ruling and that it will keep retired workers’ health plans unchanged for the next two months while it continues negotiating with the union.

Patriot Coal Corp. did not detail the cuts it put in place Monday, the first day they could take effect under U.S. Bankruptcy Judge Kathy Surratt-States’ May 29 ruling empowering the St. Louis-based company to abandon its collective-bargaining agreements with the nation’s biggest miners’ union.

Patriot, in a statement, said it has continued bargaining with the United Mine Workers of America — the union that vigorously opposed the planned cuts Surratt-States ultimately approved — and that negotiations “have resulted in substantial progress toward a consensual resolution.”

“Patriot and the UMWA are continuing to meet in a diligent effort to resolve the outstanding differences and reach a consensual agreement,” the company said, adding that both sides hope to have a final resolution for the union’s members to consider by the end of this month.

Phil Smith, a spokesman for the union, declined to publicly discuss Monday’s cuts that Patriot termed “significantly improved” from what the court allowed, saying only that “we are continuing to meet with Patriot to make further improvements over the judge’s order.”

During an April hearing, the union, through its lawyer, threatened to strike if Surratt-States’ ruling didn’t go its way, but it wasn’t clear Tuesday to what extent a walkout remained an option. Patriot has warned that a strike “would put the company on a path to liquidation, which is the worst possible outcome for UMWA employees and retirees.”

Patriot’s proposed cuts have been the most contentious aspect since the Peabody Energy Corp. spinoff filed for Chapter 11 bankruptcy a year ago, saying it would have to spend an unsustainable $1.6 billion to cover the health care costs, putting it at risk of folding.

In her 102-page ruling, U.S. Bankruptcy Judge Kathy Surratt-States concluded that Patriot’s actions were legal, and perhaps even unavoidable.

While looking to cease pension contributions, Patriot has proposed creating a trust with up to $300 million from future profit-sharing to fund some level of health benefits. Patriot also would give the union a 35 percent equity stake in the company once it emerges from bankruptcy.    

In Patriot’s case, the company’s chief executive, Ben Hatfield, has called the moves necessary for the coal company’s survival and the preservation of more than 4,000 jobs, the bulk of them in Kentucky and West Virginia.  

Union leaders contend that Patriot was saddled with unsustainable pension and long-term health care obligations when Peabody jettisoned it as a separate company in 2007, essentially setting it up to fail. Peabody disputes that.

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