Patriot's latest offer includes 35 percent stake
CHARLESTON, W.Va. -- Patriot Coal is making new proposals to the United Mine Workers of America to resolve its conflict with the union over company efforts to cut health-care and pension benefits.
Janine Orf, Patriot's vice president for investor relations, said Thursday that the UMW would be given "a direct 35 percent equity stake in the reorganized enterprise."
The bankrupt company said the union could then sell all or part of the stake and put the money in the new voluntary employees beneficiary association, or VEBA, that the company has proposed setting up.
Under the company's new proposal, retiree health-care benefits would be moved to the VEBA Trust on Jan. 1, 2014, an extension of six months, if the UMW agrees to a short-term funding proposal.
If union leaders agree, UMW retirees and their beneficiaries will continue getting their current level of benefits until the end of the year.
The extension is being offered, Orf said, to give the UMW "ample time" to figure out the "optimum level of health-care coverage the VEBA Trust can provide."
In addition to a "profit-sharing contribution" under previous proposals from Patriot, the company also would pay a royalty for every ton of coal produced at all its mining complexes.
Orf said royalty payments would put additional tens of millions of dollars into the VEBA Trust.
In its bankruptcy filings, Patriot stated: "Unfortunately, Patriot simply does not have the financial resources to support its current benefit levels and will not survive without substantial changes across its cost structure.
"While we very much regret that these changes are necessary, we hope and trust that the UMWA will work with us on a collaborative basis to achieve a successful reorganization.
"Failure to reorganize will almost surely lead to a devastating loss of jobs and health-care coverage for more than 21,000 active workers, retirees and their dependents," according to Patriot's statement.
Patriot Coal was founded Oct. 31, 2007, when Peabody Energy sold all its union operations east of the Mississippi to the newly created company.
In 2008, Patriot bought Magnum Coal, a company that took over union mines once operated by Arch Coal.
Under those deals, Patriot assumed responsibility for tens of millions of dollars in benefits promised to union members who had already retired from Peabody and Arch coal mines in West Virginia, Kentucky and Illinois.
Patriot filed for Chapter 11 bankruptcy in July 2012. UMW officials have said that Patriot was designed to fail, and that other coal companies wanted to get out of their union-negotiated benefit obligations by shoving them onto a new company that would soon go bankrupt. Patriot officials have denied that.
More than 7,000 miners and their supporters held a rally against Patriot April 1 in Charleston.
During his speech at that rally, AFL-CIO President Richard Trumka said, "The eyes of America are on us when we stand up against Wall Street cheats for the dignity of our workers."
Patriot, Trumka argued, "stands for everything that is wrong in America today. It is against every American value. You can't game the American system anymore. We won't let you do it anymore."
In a full-page advertisement published in The Charleston Gazette and Charleston Daily Mail on Thursday, the UMW stated Patriot's proposal would not "merely 'transition' the existing program that provides health care for these senior citizens."
The union's ad said Patriot's latest proposal "would eliminate [the existing program] entirely," setting up a completely inadequate fund for its retired miners.
"Patriot was born to fail after Peabody Energy and Arch Coal turned their backs on decades of promises to the miners who made those companies among the most profitable in the world," the ad said.
Reach Paul J. Nyden at firstname.lastname@example.org or 304-348-5164.