Businesses making efforts to save regain financial control through bankruptcy have much to consider. The debt restructuring efforts go beyond the desk of the corporate leader and, often, have significant impact on operations and employees. One area that is often targeted as a source of cost cutting is labor contracts.
Despite the intent of such organizations to begin with, labor unions have been hit hard in these economic time. Once thought to be a source of protection for employees during corporate financial hardship, many labor unions have become the target instead.
After a weeklong protest in the streets of St. Louis, a federal bankruptcy judge gave the stamp of approval for Patriot Coal Corp. to cut retiree health benefits in efforts to facilitate restructuring efforts. With the go-ahead from the court, Patriot Coal may have gained the upper hand in renegotiating the contracts with United Mine Workers of America.
Patriot filed for Chapter 11 nearly one year ago and has been working towards debt resolution. Company representatives are considering many strategies for debt reduction and cost saving measures; however, it is estimated that lowering the wages to non-union employee levels and reducing some of the health benefits for retirees could save the company by reducing costs by $150 million.