Bankruptcy Is The Only Option Now.....


Aug 20, 2002
Given the events of the last several days, my crystal ball says that the board will have no option other than to declare bankruptcy. It''s choices are narrowed by the following situations:

1. If it chose go along with the union re-vote, it would have to delay implementation of the concessions for another period of time with no guarantee of the outcome. Let''s assume it takes 30 days to get everything done and the company is losing $5 million per day. Assuming the changes would immediately cut that loss in half, the company would be betting $75 million that the vote would be yes. That''s $75 million it doesn''t have.

2. If the company were to stand by the position that the unions ratified the vote, it would be tied up in court with challenges, with no certainty it would win. It would also have another major distraction to deal with.

3. If the company files bankruptcy, it has a fairly good chance of getting the judge to temporarily implement the new TAs while it works to present its new plan. Sure employee relations will suck, but, so what, they already do. On a positive note, union leadership might actually be friendlier since it takes them off the hook for the cuts. In 60 days, after a clandestine search for a new leader, Carty resigns for health reasons. Since the bankruptcy plan will only need some treaking, the company emerges from bankruptcy in nine months with new leadership and a better cost structure.

That''s my prediction.

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