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Polish Coal Miners Ride Solidarity Legacy to Oblivion

 For decades, Polish coal miners have enjoyed benefits that are the envy of their working class countrymen: An annual bonus of two months’ pay regardless of performance, company-sponsored holidays, retirement before 50, and no weekend shifts. Today, that legacy of the communist era threatens the mostly state-owned mining sector and is digging a hole in the national budget.

To understand why reform remains elusive, take a drive through Upper Silesia, the coal-rich region in southern Poland that’s home to two dozen mines. The snowy countryside, drained of color in the feeble winter light, is framed by smoking chimney stacks and elevator towers that haul coal up from the pits.

Even as European coal prices have fallen by half in recent years and producers have struggled, powerful unions have foiled government attempts to close failing operations, cut jobs, and restore the sector to profitability. In January, the Economy Ministry cautioned that without significant restructuring Kompania Weglowa SA -- the European Union’s largest coal producer -- risked bankruptcy.

With their historical ties to Lech Walesa’s Solidarity, Poland’s roughly 100,000 miners are clinging to their jobs. Their unions’ links to the 1980’s movement mean they can easily forge alliances across the political spectrum -- and threaten any reform-minded government with widespread strikes.

“We’re absolutely against any solution that would involve shutting down mines and cutting jobs,” said Przemyslaw Skupin, a union leader at the Pokoj mine, an unprofitable operation in the town of Ruda Slaska that was slated for closure in a restructuring plan the government proposed in January.
Briquette Mountains

Outside Skupin’s office in the town of Ruda Slaska, the smell of burning coal lingers in the air and black-faced miners in heavy boots and headlamps file out after their shifts. The town, with a history of mining that dates to the 13th century, is surrounded by mountains of shiny briquettes that few want to buy. While Poland’s utilities burned 57 million tons of coal last year, the country’s mines produced 69 million tons, the economy ministry estimates, and industry executives say imports may have reached 12 million tons.

A compact man with a trim mustache, Skupin slaps his hand on a Formica-topped table to vent his anger at the suggestion that job cuts may be unavoidable, and says he considers the government an enemy, not a negotiation partner. He suggests Kompania Weglowa, Pokoj’s owner, increase production despite the glut because “at least we’ll sell more coal and solve our cash-flow problem.”

Such intransigence has hobbled efforts by Prime Minister Ewa Kopacz to keep mining companies afloat. The two sides clashed in January after her centrist government introduced a plan to bolster the finances of Kompania Weglowa, which was running out of cash to pay wages.

The initiative would have shut four of Kompania Weglowa’s 14 mines, eliminating almost 5,000 jobs. If voters expected Kopacz, a bespectacled former pediatrician, to morph into a second Margaret Thatcher, they were disappointed. With elections for president in May and for parliament in the fall, Kopacz couldn’t afford a general strike and gave in to virtually all of the unions’ demands.
Police Clashes

A revised plan, which Kopacz called “a good compromise for Poland’s mining industry,” could cost the state some 2.3 billion zlotys ($614 million) through 2016, the government says. Kompania Weglowa’s unprofitable mines will be transferred to a separate entity to be restructured and sold off. Most other facilities will be folded into a new company to be owned by Weglokoks SA, the country’s state-owned coal trader, and potentially by state-controlled utilities. Miners within four years of retirement will be offered paid leave while others will either keep their jobs or be transferred to different mines.

“In the end Kopacz didn’t solve the coal industry’s cash flow problem at all,” said Otilia Dhand, an analyst at political risk adviser Teneo Intelligence in Brussels. “She just shifted it from one pocket to another.”

Dhand says Kopacz’s failure to enact her original plan showed weakness that has further emboldened the unions. Less than two weeks after the Kompania Weglowa crisis, miners at state-controlled coking coal producer Jastrzebska Spolka Weglowa SA clashed with police during a tense 17-day strike. With the labor strife costing Jastrzebska 27 million zlotys a day in lost sales, the company’s chief executive resigned in exchange for a minor reduction in benefits agreed to by the unions. A Jastrzebska spokeswoman says the company’s mines have returned to normal output.

At Kompania Weglowa’s headquarters, a hulking, four-story pre-war building in the industrial city of Katowice, Chief Executive Officer Krzysztof Sedzikowski says he believes the company can be made profitable. A push to mine more coking coal used by smelters rather than lower-quality fuel burned in power plants could ease overproduction, while costs could be trimmed by introducing a six-day working week.
Head Problems

Unions can be brought around if management makes a sufficiently compelling case for change, said Sedzikowski, who took over the company in December after earlier helping the government revamp loss-making LOT Polish airlines.

“It’s very easy to say, ‘I can’t do anything because of the unions,’” Sedzikowski said. “The unions are very strong, but if they see specific arguments and if you take a tough position, they’ll show some understanding.”

About 50 kilometers to the south, a mid-sized mine called PG Silesia offers evidence that supports Sedzikowski’s optimism. In 2010, as Kompania Weglowa was seeking to sell the failing operation, miners there gave up many of their benefits in order to attract a foreign investor.

“We were up against the wall,” said Dariusz Dudek, a three-decade veteran of the mine who heads its Solidarity union chapter. “The prospect of bankruptcy changes your perspective.”

Their flexibility paid off, and a Czech company called EP Holding bought PG Silesia. When the new owners took over, some workers balked at weekend shifts and others left because they didn’t like having their pay tied to output. But those who remained soon grew accustomed to the new conditions, he said, and the mine has more than doubled its workforce to almost 1,800. PG Silesia is on track to turn a profit this year.

“The problem is only in people’s heads; they just don’t like change,” Dudek said. “We were flexible in our approach to benefits, we found a common language with our owner, and thanks to that we’re still in business.”

source:http://www.bloomberg.com