Patriot Coal provides 'fact sheet' on labor proposal - WVVA TV Bluefield Beckley WV News, Weather and Sports

Patriot Coal provides 'fact sheet' on labor proposal


CHARLESTON (WVVA) - The below information was submitted to WVVA News by Patriot Coal regarding the company's proposal to employees and retirees represented by the United Mine Workers of America.

Thousands of UMWA miners and supporters rallied in Charleston Monday to protest what they say is Patriot Coal's attempt to modify its collective bargaining agreement, changing health care benefits for mining retirees.

To view Monday's report from Charleston, click here.

Patriot's response is as follows:


Facts About Patriot's Labor Proposal

The questions and answers below are intended to add clarity and address common misconceptions and factual inaccuracies surrounding the filing of Patriot's 1113/1114 motions with the Bankruptcy Court on March 14, 2013.


„h Patriot is facing two alternatives -- either obtain crucial modifications to collective bargaining agreements with the UMWA that will allow the Company to survive and continue to provide jobs and benefits for employees and retirees, or face likely liquidation.

„h Annually, Patriot spends approximately $1.8 billion on wages and benefits, goods and services, taxes and royalties. Local communities surrounding Patriot's operations could be devastated if Patriot was liquidated.


„h Patriot is committed to successfully reorganizing and emerging as a viable entity for the benefit of all stakeholders, while saving more than 4,000 jobs. Obtaining crucial savings from our labor agreements is the single most important action necessary to ensure Patriot's survival.


„h Patriot cannot afford to continue paying retiree healthcare benefits in their current form.

„h Unless these costs are addressed, Patriot will run out of money and will be unable to provide jobs or healthcare for anyone.

„h Patriot remains hopeful that it can reach agreement with the UMWA on a consensual basis, but the Company has no choice but to move forward with requesting prompt relief from the bankruptcy court now if we are to avoid severe financial disruption.


„h A strike is not in anyone's best interest and in fact would be extremely harmful to the union membership, because it would only make Patriot's financial situation worse and greatly increase the likelihood that the Company would be forced to liquidate. Liquidation would mean the loss of more than 4,000 jobs and the loss of healthcare benefits to more than 23,000 employees, retirees and their dependents.

„h The Hostess bankruptcy case, which ultimately resulted in liquidation, is an example of the outcome when employees strike following a section 1113 process.


„h Patriot needs approximately $150 million in annual savings from its UMWA employees and retirees in order to survive.

„h These necessary savings are in addition to $170 million in annual cash savings that Patriot has already identified, which include capital reductions, 2

renegotiation or rejection of contracts and reductions in non-union and salaried employee and retiree wages and benefits.


„h Contrary to some media reports, Patriot's proposal does not aim to discontinue union retiree medical benefits.

„h Under the current proposal, Patriot will continue to directly provide healthcare to approximately 13,000 active employees, Coal Act retirees, Black Lung benefit recipients and their dependents.

„h Patriot's proposal provides for the establishment of a Voluntary Employee Beneficiary Association (VEBA) trust to provide meaningful long-term healthcare benefits for union retirees.

„h There is no realistic scenario whereby Patriot can afford to continue to fund retiree healthcare benefits at current levels under the collective bargaining agreements. Establishment of the VEBA trust in accordance with the proposal allows for continued healthcare coverage for union retirees at a level that Patriot can afford while allowing Patriot to survive and emerge from bankruptcy.


„h We are NOT proposing to "throw out" our collective bargaining agreements, but rather to amend them in order to survive.

„h The proposal would adjust union employee wages, benefits and work rules to be consistent with Patriot's non-union hourly employees.

„h Hourly wages would be adjusted to be in-line with the regional labor market.

„h Union employees would be offered the same healthcare benefits as non-union employees.

„h More flexible work rules would allow Patriot to realize additional efficiencies in its coal production.


„h We are NOT proposing to eliminate healthcare for UMWA retirees.

„h UMWA retiree healthcare would be transitioned to a Voluntary Employee Beneficiary Association (VEBA) trust that would be designed and administered by the UMWA or the UMWA Health and Retirement Funds.

„h Patriot would fund the trust with:

o A significant ownership percentage of the reorganized company, which is expected to be worth hundreds of millions of dollars,

o Profit sharing, up to a maximum of $300 million,

o An initial cash contribution of $15 million, and

o Future recoveries from litigation.

„h This funding will provide meaningful long-term healthcare benefits for union retirees.

„h Coal Industry Retiree Health Benefit Act of 1992 (Coal Act) and Black Lung beneficiaries would NOT be affected by this proposal, and their benefits will remain unchanged. 3


„h The proposals have been filed with the bankruptcy court and can be found at the following link:



„h No. Coal Industry Retiree Health Benefit Act of 1992 (Coal Act) and Black Lung beneficiaries would NOT be affected by this proposal.

„h These beneficiaries will continue to receive the same benefits they've been receiving under these federally mandated programs.


„h Patriot is proposing to withdraw from the 1974 UMWA Pension Plan.

„h However, current pension benefits should not change as a result of this proposal.


„h Wages and benefits of all non-union employees have been reduced significantly, both before and during our bankruptcy filing.

o These employees received no raises for the last two years.

o Salaried employees' pay was reduced by 2.5% in 2013.

o Non-union hourly employees' pay was adjusted to the regional labor market, which in some cases represented substantial reductions.

o Incentive plans, such as the 2012 annual incentive plan and the long-term incentive plan, were discontinued.

o Holiday, personal leave and vacation time were reduced.

o Medical insurance premiums were increased.

o We are seeking to discontinue various benefit plans, and accrued benefits under these plans will no longer be available to these employees.

o Salaried and non-union employees will receive NO retiree benefits.


„h We are seeking Court approval to terminate substantially all non-union and salaried retiree healthcare benefits paid by Patriot.

„h If the changes we are proposing are implemented, the retirees covered by the motion will receive NO healthcare benefits from Patriot going forward.


„h We have proposed retention and incentive compensation plans (not bonus plans) to motivate key employees to remain with Patriot and to achieve financial and operating goals essential to our reorganization.

„h Patriot's executive management team, including the President and Chief Executive Officer and the other top five officers, have voluntarily declined participation and will receive nothing from either of these plans. 4

„h Even if financial and operating performance goals in the plan are achieved, compensation for participating employees will be well below amounts earned prior to the Company's bankruptcy filing, as well as below market levels.


„h We are not defending Peabody or any of its decisions related to the transactions that ultimately created Patriot.

„h Patriot filed a lawsuit against Peabody on March 14 in an effort to ensure that Peabody will continue to fund its obligations to certain retirees in full.

„h Together with the official committee of unsecured creditors, of which the UMWA and the UMWA 1974 Pension Plan are both members, Patriot continues to investigate potential claims against Peabody and other third parties in connection with the spinoff and other transactions.

„h Patriot – and we believe the UMWA and the UMWA 1974 Pension Plan as well – intends to vigorously pursue their rights and remedies against Peabody, and it is very possible that additional lawsuits will be brought.

Will Peabody continue to have responsibility to provide healthcare benefits to certain Patriot retirees?

I hear that Patriot is trying to get executive bonuses approved. How can they justify this?

Have non-union and salaried retirees also taken such severe cuts?

Have non-union and salaried employees also taken such severe cuts?

How would Patriot's proposal affect the multi-employer pension plan administered by the UMWA?

Is Patriot proposing to amend or discontinue Black Lung or Coal Act benefit payments?

Are the proposals confidential, or where can I find them?

What are the major components of Patriot's proposal for UMWA retirees?

What are the major components of Patriot's proposal for UMWA employees?

How can Patriot break its promise of lifetime healthcare to retirees?

Why is Patriot seeking such deep cuts from its UMWA employees and retirees?

Are you concerned about a possible strike by the UMWA?

What will happen if Patriot and the UMWA can't reach agreement?

What is Patriot's motivation?

What is at stake?

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