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Union wants UAL CEO out
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October 24, 2001: 12:55 p.m. ET
Board-represented Machinists say Goodwin hurts employees, stock.
By Staff Writer Chris Isidore
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NEW YORK (CNNmoney) - The president of the International Association of Machinists (IAM), whose members own about 20 percent of the stock in United Airlines parent UAL Corp., is calling for the removal of UAL CEO James Goodwin.
In a letter to the company's board of directors, which includes a IAM representative, union President Thomas Buffenbarger says that stronger leadership and better communication with employees is needed. He is particularly critical of a letter that Goodwin sent to UAL employees last week that said the future of the airline is in doubt in the current economic conditions.
"As we all know, expressions of doubt about a carrier's financial viability can become a self-fulfilling prophecy," said Buffenbarger's letter.
A spokesman for UAL was not immediately available on the IAM's call.
The UAL board was meeting Wednesday, according to the Air Line Pilots Association, whose members own about 25 percent of the company's stock and which also has a representative on the board. A spokeswoman for ALPA said that union had no immediate comment on Buffenbarger's letter.
The Association of Flight Attendants, whose members are not part of the employee ownership stock plan, issued a release last week also calling for Goodwin's removal.
Goodwin's letter to employees said the company was "literally hemorrhaging money" and was in "a struggle just to survive."
Shares of UAL, which were already depressed following the Sept. 11 terrorist attack, lost more than 20 percent of their value in the two days following the reports of Goodwin's letter to employees last Wednesday. While the stock regained some of that lost ground since, shares of UAL (UAL: down $0.68 to $14.82, Research, Estimates) were down about 5 percent Wednesday following the release of the IAM letter.
Buffenbarger said not only did the letter shake investor confidence in the airline, it hit employee morale particularly hard. United announced it was laying off about 12,000 employees
"Given the massive number of layoffs since September 11th, management should be doubling its efforts to assure that the employees who remain on the payroll feel secure so that they can perform their responsibilities to the best of their abilities," said the letter. "Threats like this do nothing but destroy morale among the very employees who are critical to United's future success."
Both the IAM and AFA statements criticized UAL for going ahead with the purchase of some corporate jets as part of a new venture to have the company lease the partial shares of those jets for business travelers. That operation would not include current union employees.
Losses expected to climb
UAL has yet to report third-quarter results. Analysts surveyed by the research firm First Call forecast the company lost $9.89 a share in the third quarter, wider than the loss of $1.29 a share a year earlier. The loss is forecast to grow to $13.21 a share in the fourth quarter, and hit $25.26 a share in 2002.
On Wednesday, AMR Corp., which operates both American Airlines and Trans World Airlines, reported a much larger than expected third quarter loss that was a record for the company.
Mike Linenberg, airline analyst with Merrill Lynch, said that Goodwin's letter was honest, not alarmist, and that he doesn't believe that it hurt the company's already troubled outlook.
"We're looking at the company to show a pretax margin of minus 26 percent. That's not sustainable," said Linenberg. "I get the sense that some groups don't understand the predicament they're in."
Ray Neidl, analyst with ABN Amro, said it was crucial for the airlines to win wage concessions from the unions in the current environment, and the need to do so outweighed the damage to the stock price and bond prices caused by Goodwin's letter.
"If telling the truth hurts the company, it hurt," said Neidl. "Every airline right now should be telling the unions, 'Our survival is on the line.'"
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Neither Neidl nor Linenberg would make a prediction on Goodwin's chance of survival in his job amid these calls.
"When you've got employees group against you, and they've got people on the board, they can certainly make your life difficult," said Neidl.
But the analysts said they didn't believe that anyone else at the airline or on the outside would be able to deal with the crisis any better, especially with the majority of shares being held by employees.
"It's very difficult position for the CEO to be in. It's between a rock and a hard place," said Linenberg.
The IAM represents about 40,000 current and laid-off United employees, including mechanics, ramp workers and customer service representatives. It has been trying to negotiate a new contract for its 15,000 mechanics members.
On Aug. 24 both management and the union were poised to ask to have an impasse declared in those talks, a move that could have started the a 30-day cooling off period that could be followed by a possible strike. But the National Mediation Board, which oversees labor relations in the industry, never got around to ruling on that request before the Sept. 11 attack. 
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