GogglesPisano
Pawn, in game of life
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Unions Wield More Influence in Bankruptcy
Friday April 7, 2:11 pm ET
By Harry R. Weber, AP Business Writer
Week's Business: Unions Carrying More Influence in Bankruptcy Cases
ATLANTA (AP) -- Bankrupt companies hold a big stick in how their reorganization turns out. They can cancel contracts, eliminate stock options and wipe away debt.
But increasingly, labor unions, especially in recent airline bankruptcies, are trying to show they have muscle, too. Their weapon: strike, or at least make management think you will.
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From the airline to the auto industry, unions are attempting to protect their pay and their pensions. But some legal experts caution that unions can do as much harm to themselves as their companies by taking a stand in bankruptcy. And some question whether the threat of a walkout really does carry much weight.
The union activities come at a time when employees feel they're under more pressure than ever to match their peers in the money they make, the hours they work and the benefits they receive. And in this fight, not all unions are created equal, with some enjoying more success in labor disputes than others because of their role in their company.
"While unions might not have much in the way of power in a Chapter 11 case, they have a unique kind of influence," said David Dykhouse, a New York bankruptcy attorney. "They might not get their way, but they've been sort of taken into account and things end up not being the way they would have been had the union not had this role."
It's yet to be determined whether the pilots union at Delta Air Lines Inc., the nation's No. 3 carrier, will have much power or influence to decide its fate in the company's bankruptcy case.
The union voted on Tuesday to authorize a strike at the Atlanta-based company, and it says it will walk out if Delta is successful in persuading an arbitration panel to void its contract with its 5,930 pilots so the airline can impose up to $325 million in long-term pay and benefit cuts. But the company so far isn't flinching, even with some customers turning to other carriers, and with time running out for the two sides to reach a deal on their own.
Other industries, like the auto industry, also face strike threats by unions representing employees of companies in bankruptcy.
The United Auto Workers responded angrily last week when auto parts supplier Delphi Corp. asked a federal judge to cancel its labor contracts so it can impose wage cuts. Delphi filed for bankruptcy protection last fall and the judge is scheduled to consider the company's request May 9.
The UAW, which represents around 24,000 of Delphi's 33,000 U.S. hourly workers, has threatened to strike if the judge allows Delphi to cancel its contracts and Delphi imposes the wage cuts it proposed in its last offer. Delphi wants to cut pay from $27 an hour to $16.50 an hour.
But David Cole, president of the Center for Automotive Research in Ann Arbor, Mich., said strike threats are losing their power because all parties know that strikes could be deadly to the companies involved.
"Before, there was no question. Even if there was a strike, the company was going to be there. It was the Rock of Gibraltar. It was not going away," Cole said. "The company is in play today, so it just changes the atmosphere very dramatically."
Despite union rhetoric, there is much more collaboration behind the scenes than there used to be because a bankruptcy filing forces labor and management to see how much they depend on each other.
"They succeed together or they fail together," Cole said. "The risk from the union perspective is that if you throw out the contract, then all of a sudden, what you have planned for a whole career on is up in the air. That's a pretty dismal potential outcome. What's far preferred is that you come to a deal together."
That is particularly true in Delphi's case, Cole said, because the company has an older workforce and workers want to make sure they can retire with their pensions and benefits intact.
Northwest Airlines Corp. already had its bankruptcy court showdown with pilots who threatened to walk off the job if the airline was allowed to throw out their contract. Pilots held rallies and staged informational pickets at airports while negotiations hurtled past a court-imposed deadline.
In the end, the pilots' representatives kept a proposed Northwest subsidiary limited to jets with 76 seats -- a smaller plane than Eagan, Minn.-based Northwest had wanted, and one that would force it to use more pilots. Even then, it's not clear whether the deal will succeed. Pilots have not approved it yet.
Northwest baggage handlers haven't fared as well. They rejected the airline's proposed settlement and authorized a strike, in hopes that the airline would offer them a better deal. It hasn't. Instead, Northwest will ask a bankruptcy judge to let it throw out the baggage handler's union contract at a hearing beginning May 15.
For all the tough talk, some legal experts say unions can be hampered in their efforts when others in their industry are agreeing to similarly deep pay cuts.
"Their enemy is not the debtor or the bankruptcy court, but the scourge of deflation," said bankruptcy attorney William Rochelle, referring to reduced wage scales at peer companies. "I think the unions can hold their own when they're going one-on-one against management, but when they are also in a deflationary environment, they're outnumbered."
Airlines provide a unique situation for pilots unions in trying to exert power in labor disputes, however.
Unlike other industries, it's difficult to near impossible for an airline whose pilots go on strike to come up with replacements in enough time to keep the company afloat. Delta has said a pilot strike would put it out of business.
"Airlines are a very special case, particularly when it comes to pilots," said David Treitel, chief executive of aviation consulting firm SH&E in New York.
He said pilots are highly skilled individuals who have licensing requirements that are not typical of unions in general.
"Finding alternatives if you will is not a practical thing," Treitel said. "It can't be done. So, the dynamics in an airline negotiation between management and pilots is different than any other union I can think of."
AP Business Writers Joshua Freed in Minneapolis and Dee-Ann Durbin in Detroit contributed to this report.
Friday April 7, 2:11 pm ET
By Harry R. Weber, AP Business Writer
Week's Business: Unions Carrying More Influence in Bankruptcy Cases
ATLANTA (AP) -- Bankrupt companies hold a big stick in how their reorganization turns out. They can cancel contracts, eliminate stock options and wipe away debt.
But increasingly, labor unions, especially in recent airline bankruptcies, are trying to show they have muscle, too. Their weapon: strike, or at least make management think you will.
ADVERTISEMENT
From the airline to the auto industry, unions are attempting to protect their pay and their pensions. But some legal experts caution that unions can do as much harm to themselves as their companies by taking a stand in bankruptcy. And some question whether the threat of a walkout really does carry much weight.
The union activities come at a time when employees feel they're under more pressure than ever to match their peers in the money they make, the hours they work and the benefits they receive. And in this fight, not all unions are created equal, with some enjoying more success in labor disputes than others because of their role in their company.
"While unions might not have much in the way of power in a Chapter 11 case, they have a unique kind of influence," said David Dykhouse, a New York bankruptcy attorney. "They might not get their way, but they've been sort of taken into account and things end up not being the way they would have been had the union not had this role."
It's yet to be determined whether the pilots union at Delta Air Lines Inc., the nation's No. 3 carrier, will have much power or influence to decide its fate in the company's bankruptcy case.
The union voted on Tuesday to authorize a strike at the Atlanta-based company, and it says it will walk out if Delta is successful in persuading an arbitration panel to void its contract with its 5,930 pilots so the airline can impose up to $325 million in long-term pay and benefit cuts. But the company so far isn't flinching, even with some customers turning to other carriers, and with time running out for the two sides to reach a deal on their own.
Other industries, like the auto industry, also face strike threats by unions representing employees of companies in bankruptcy.
The United Auto Workers responded angrily last week when auto parts supplier Delphi Corp. asked a federal judge to cancel its labor contracts so it can impose wage cuts. Delphi filed for bankruptcy protection last fall and the judge is scheduled to consider the company's request May 9.
The UAW, which represents around 24,000 of Delphi's 33,000 U.S. hourly workers, has threatened to strike if the judge allows Delphi to cancel its contracts and Delphi imposes the wage cuts it proposed in its last offer. Delphi wants to cut pay from $27 an hour to $16.50 an hour.
But David Cole, president of the Center for Automotive Research in Ann Arbor, Mich., said strike threats are losing their power because all parties know that strikes could be deadly to the companies involved.
"Before, there was no question. Even if there was a strike, the company was going to be there. It was the Rock of Gibraltar. It was not going away," Cole said. "The company is in play today, so it just changes the atmosphere very dramatically."
Despite union rhetoric, there is much more collaboration behind the scenes than there used to be because a bankruptcy filing forces labor and management to see how much they depend on each other.
"They succeed together or they fail together," Cole said. "The risk from the union perspective is that if you throw out the contract, then all of a sudden, what you have planned for a whole career on is up in the air. That's a pretty dismal potential outcome. What's far preferred is that you come to a deal together."
That is particularly true in Delphi's case, Cole said, because the company has an older workforce and workers want to make sure they can retire with their pensions and benefits intact.
Northwest Airlines Corp. already had its bankruptcy court showdown with pilots who threatened to walk off the job if the airline was allowed to throw out their contract. Pilots held rallies and staged informational pickets at airports while negotiations hurtled past a court-imposed deadline.
In the end, the pilots' representatives kept a proposed Northwest subsidiary limited to jets with 76 seats -- a smaller plane than Eagan, Minn.-based Northwest had wanted, and one that would force it to use more pilots. Even then, it's not clear whether the deal will succeed. Pilots have not approved it yet.
Northwest baggage handlers haven't fared as well. They rejected the airline's proposed settlement and authorized a strike, in hopes that the airline would offer them a better deal. It hasn't. Instead, Northwest will ask a bankruptcy judge to let it throw out the baggage handler's union contract at a hearing beginning May 15.
For all the tough talk, some legal experts say unions can be hampered in their efforts when others in their industry are agreeing to similarly deep pay cuts.
"Their enemy is not the debtor or the bankruptcy court, but the scourge of deflation," said bankruptcy attorney William Rochelle, referring to reduced wage scales at peer companies. "I think the unions can hold their own when they're going one-on-one against management, but when they are also in a deflationary environment, they're outnumbered."
Airlines provide a unique situation for pilots unions in trying to exert power in labor disputes, however.
Unlike other industries, it's difficult to near impossible for an airline whose pilots go on strike to come up with replacements in enough time to keep the company afloat. Delta has said a pilot strike would put it out of business.
"Airlines are a very special case, particularly when it comes to pilots," said David Treitel, chief executive of aviation consulting firm SH&E in New York.
He said pilots are highly skilled individuals who have licensing requirements that are not typical of unions in general.
"Finding alternatives if you will is not a practical thing," Treitel said. "It can't be done. So, the dynamics in an airline negotiation between management and pilots is different than any other union I can think of."
AP Business Writers Joshua Freed in Minneapolis and Dee-Ann Durbin in Detroit contributed to this report.
