May 3, 2013 / 9:52 PM / 6 years ago

Mine workers union warns of strike at Patriot Coal if contract voided

ST. LOUIS, May 3 (Reuters) - A lawyer for the United Mine Workers of America on Friday told a bankruptcy judge it would be forced to strike if Patriot Coal Corp succeeds in voiding its contract with the union, as five days of contentious court hearings came to an end.

Attorney Fred Perillo said the union would do everything in its power to reach a consensual agreement with Patriot, which is seeking to impose $150 million a year in labor cuts.

But if Judge Kathy Surratt-States approves the proposal, which would end pension contributions, alter healthcare and lower pay rates, Perillo said a strike will follow.

“No contract, no work,” Perillo said during closing arguments to cap off the hearing in U.S. Bankruptcy Court in St. Louis.

Ben Hatfield, Patriot’s chief executive, said later that Perillo’s remarks were ill-conceived.

“It’s a poor time to be throwing out threats,” Hatfield told Reuters in an interview outside the courtroom. “I think reasoned judgment will prevail when it comes to workers retaining their jobs in this environment.”

Hatfield said a UMWA strike would be a replay of what happened in the bankruptcy of Hostess Brands Inc, which last year liquidated after a union strike caused it to hemorrhage money.

Judge Surratt-States has until May 29 to rule in the Patriot case.

St. Louis-based Patriot declared bankruptcy in July amid weak coal markets and heavy pension and healthcare costs, saying it needed major concessions from unions to stay in business.

Patriot has proposed ceasing pension contributions and transferring healthcare to a voluntary employees’ beneficiary association, or VEBA, stocking it with $15 million in up-front cash and another $300 million in profit-sharing contributions.

It would give the union a 35 percent equity stake in reorganized Patriot, which could be sold to help fund the VEBA.

Without the cuts, the company has said it would be forced to liquidate. The union, which represents about 1,700 current Patriot workers and another 13,000 retirees and their families, has called the proposal “nowhere near” fair, and staged heated rallies in St. Louis, New York and elsewhere.

Bankruptcy laws allow companies to impose unilateral cuts to labor contracts, but only if they can show the cuts are critical to survival and that a good faith effort was made to achieve them consensually.

Before the start of closing arguments on Friday, Patriot’s unsecured creditors’ committee said it had withdrawn its initial objection to the 35 percent stake.

Patriot lawyer Ben Kaminetzky in his closing argument criticized the UMWA for casting the issue as a “Wall Street against Main Street” class struggle, saying Patriot did not begrudge the benefits and wages collected by union workers, but simply “cannot afford them.”

Kaminetzy balked at the union’s position that it has been asked to bear a disproportionate share of Patriot’s cuts, saying nonunion employees have sacrificed for years while union workers have received “multiple raises.”

Patriot reached consensual concessions from its non-union workers last month.

One key topic on which the union and Patriot agree is the liability of Peabody Energy, the former parent that spun Patriot off in 2007. Patriot and the UMWA have filed lawsuits seeking to keep Peabody on the hook if Patriot cannot afford to pay benefits.

The union has alleged that Peabody saddled Patriot with unsustainable legacy costs, knowing it would eventually fail.

But Kaminetzky said the union “sounds like it wants to reward Peabody with Patriot’s liquidation” by resisting cutbacks that are necessary for survival.

A Peabody spokesman on Friday declined to comment, but in the past has said that the spinoff was above board.

“Patriot was highly successful following its launch more than five years ago with significant assets, low debt and a market value that more than quadrupled in less than a year,” the spokesman Vic Svec said in a statement earlier this week.

The bankruptcy is In Re Patriot Coal Corp, U.S. Bankruptcy Court, Eastern District of Missouri, No. 12-51502.

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