Patriot Coal Case

Peabody Coal began in the 1880s as a delivery service in the Chicago area and opened its own mining operation in Southern Illinois. By 1913, it was servicing electric companies and by 1949 it was listed on the New York Stock Exchange.
Strip mining began to take over the market share in the 1950s. In 1955 Sinclair Coal, the third largest coal producer, took over and assumed the name of Peabody. In 1968 the company was acquired by Kennecott Copper, in 1976 by Newmount Mining, and in 1990 by Britian;s Hansen PLC. In 1997 it was spun off and acquired by Lehman Brothers, who, in 2001 sold 40% of shares to the public and a few years later sold the rest of its holdings. All of Peabody’s shares now trade openly on the New York Stock Exchange

According to CFO Shroeder the company needed to trim labor costs to help compensate for the need to spend hundreds of millions of dollars on a water treatment plant and pension benefits in the years ahead. It is his opinion that Patriot Coal would emerge from bankruptcy as a viable and strong competitor in the industry. Patriot is asking the court’s approval to reduce pay and continued benefits.
On Wednesday, May 29, 2013, the Gazette reported that a Federal Bankruptcy Judge gave the OK for Patriot coal to cut health benefits for retired coal miners and their spouses as part of the plan to emerge from bankruptcy.
The ruling by Judge Surratt-States told Patriot Coal they could discontinue the current contract with the United Mine Workers of America (UMWA) and move the current “retiree health care to the UMWA Retiree Healthcare Trust, which shall be structured as a Voluntary Employee Beneficiary Association.” This specifically approved Patriots requests to break the bargaining agreements and modify the retiree

I believe Patriot outlasted the expectations of everyone involved by having several successful years given the tacit knowledge it gained over the time it was with the Peabody Energy group.
As the older workers that made up the Patriot Coal operations when it began started to retire and make the inherited burden even greater, it was destined to fail given the Golem effect in that the negativity would end as a negative final result.
I fully believe that Peabody Energy was successful in taking care of their problem of high retiree healthcare and pension benefits. The innovative processes brought into play should be highly regarded in the corporate community. Without the successful spin off of Patriot Peabody would have been strapped into funding the healthcare need it had created with employee safety lags and the longevity due to the negotiated beneficiary portion.
The plan was genius, however, unethical and should never have been allowed to happen. The United States judicial system needs to be aware of this loophole and lawmakers need to find a way to keep it from happening