TWA unions innovate by backing Icahn takeover bid
After watching the corporate-takeover tactics of American companies for several years, two unions unveiled a variation of their own this summer. Call it the ``blue-collar-knight'' strategy -- patterned after the ``white-knight'' strategy some corporations use to avoid a hostile takeover by adopting a friendly buyer.
The rank and file of two Trans World Airlines unions were expected yesterday to approve an innovative agreement with New York financier Carl Icahn. The pact would bolster Mr. Icahn, who is locked in a three-way struggle with TWA management and Texas Air Corporation for control of the financially troubled air carrier.
TWA management is trying to arrange a deal by which Texas Air Corporation would become the majority stock shareholder in TWA. The TWA board met yesterday to decide which takeover bid to accept. No decision had been made at this writing.
If Icahn, with union support, takes over the airline, it may well be the first time unions have used a white-knight strategy in the private sector to their advantage.
``This is very different'' from other unions' deals with employers, says Brian M. Freeman, a Washington-based investment banker who has worked on a number of innovative arrangements for labor unions, including this one. The unions want to deal with Icahn because the alternative is for the TWA board of directors to accept a bid by Frank Lorenzo, head of Texas Air. Mr. Lorenzo is unpopular with unions, because some years ago he used bankruptcy proceedings to void union contracts and to turn Continental Ai rlines into a nonunion air carrier.
``In our opinion, this is the best of the bad choices,'' says Carl Laws, secretary-treasurer of district Lodge 142 of the International Association of Machinists.
``We definitely wanted no part of Mr. Lorenzo,'' he adds. ``We didn't want to end up being another Continental.''
As with other contracts recently negotiated with airlines, the proposed arrangement with Icahn calls for union concessions on wages and benefits. The 9,600 TWA workers represented by the machinists' union are looking at a $2-an-hour cut in wages that currently average about $15.
The 3,100 TWA pilots represented by the Air Line Pilots Association have agreed to cuts of 22 percent in salaries and 4 percent in benefits should the Icahn deal go through.
A third TWA union representing flight attendants is expected to agree to similar cuts.
In return, Icahn has said he would let the employees own 20 percent of the company's stock and receive 20 percent of any profits.
Will other unions call for help from a blue-collar knight?
``It will always be the exception rather than the rule,'' Mr. Freeman says. But the game plan of the TWA unions signals labor's willingness to adapt. ``They'll become more sophisticated.''