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BROTHERHOOD OF RAILWAY, AIRLINE AND STEAMSHIP CLERKS, FREIGHT HANDLERS, EXPRESS AND STATION EMPLOYES

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This has reference to and will acknowledge receipt of your letter dated January 11, 1984, received in this office January 18, 1984, wherein you solicit my comments concerning the effects or impact on workers of companies involved in mergers.

Initially, I would like to thank you for the opportunity to comment on this subject for, as you pointed out, the worker is seldom consulted or even considered during proposed mergers. I would also like to make it clear that I am not an opponent of mergers or the advance of new technology if the interests of the workers and the public in general are taken into consideration. Our experience with mergers in the rail industry is that such mergers have not created more jobs as some would lead us to believe, but in fact the opposite is true. Where two railroads merge they inevitably will combine their separate facilities and their corporate structures. This serves to reduce expenses and enhance management's profits but is devastating to the members we represent and the public in general.

For instance, in the proposed purchase of the Chicago, Milwaukee, St. Paul and Pacific Railroad by the Chicago and North Western Railroad, the C&NW readily admits that the merger will cause the elimination of approximately 2,000 railroad jobs. Of course, this causes great concern to labor because it is our responsibility to protect the interests of our members. This also, however, should be a concern to you and the public in general. These railroad workers may be your constituents and certainly are members of the local communities which will be adversely affected by their job loss. Without jobs these people will not be participating as taxpayers to support the local schools and local businesses.

3 RESEARCH PLACE, ROCKVILLE, MARYLAND 20850 (301) 948-4910

We in the railroad industry are fortunate in that the Interstate Commerce Commission is supposed to regulate mergers and acquisitions and apply employe protection to the workers affected by any merger that they authorize. The problem is with deregulation of the railroad industry mergers are quickly authorized with minimal protection to the worker and very little consideration given to the impact on the communities these railroads serve. I firmly believe that all mergers in any industry should consider the impact on the labor force and the ripple effect it will have on the community.

We in the railroad industry have watched the major railroads evolve into huge conglomerates or holding companies. CSX, Norfolk Southern, Southern Transportation are but a few of such conglomerates. They have diversified into timber, communications, coal, mining, etc. The profits being diverted to these other companies provide better returns on their money and certainly help the new corporations but do little to help the railroads. Simply because this leaves less money to refurbish and update the existing equipment and roadbeds. For example, a small plant run by an individual usually reinvests the money into the company to keep it going during hard times, however, if that small plant is purchased by a large conglomerate, the large conglomerate has little sympathy for it during hard times when the plant is losing money. Invariably the subsidiary is told to cut costs (usually labor) or face the possibility of a shutdown. This, in my opinion, has contributed to the sharp increase in plant closings and bankruptcies that have occurred lately.

As previously stated, I am not an opponent to mergers and/or acquisitions since our nation must remain competitive if it is to survive. I do firmly believe, however, that in all cases of mergers or acquisitions the impact on the workers and the effects of dislocation of the worker on the community involved should be considered. Measures must be taken to retrain the workers to compete for new jobs that become available, many of which will be in the high tech areas. If the corporations are to profit from the merger they must also share in the responsibility of protecting the workers who are displaced as a result. By doing so, they will also be protecting the communities who depend on them for survival. Most trade unionists are not looking for a handout but merely equity in such mergers and the right to a job and dignity.

subject.

Again, thank you for soliciting my comments on this very important

Very truly yours,

Re
RD. Kiloy

R. I. Kilroy

International President

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This letter is in response to yours of January 11 soliciting my views on mergers and federal regulation of tender offers. I appreciate the opportunity to comment on this important issue. I applaud your efforts, and those of Senator D'Amato and others, in seeking to investigate a trend which has such major social, political and economic ramifications for our country.

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The U.S. economy is at a crossroads, facing serious structural problems, challenges and choices. The underlying question is truly one of industrial policy: will the future of such basic and strategic industries as steel and energy be determined by a laissez-faire approach such as that advocated by the SEC Advisory Committee on Tender Offers resulting in ever-greater concentration? Or will American society once again demonstrate its concern for the human costs which result from economic change and choose to at least examine and weigh those costs as advocated by H.R. 3561? The UMWA believes that it is entirely appropriate that a "public interest" standard, such as that contained in H.R. 3561, be included in the Clayton Act test which governs large firm acquisitions.

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The UMWA has a particular interest in what Congressman Seiberling has called "merger mania." The mania has reached its heights in the energy field; petroleum companies have been the leaders in the takeover game. Mobil Oil and Seagram battled over Conoco, but lost to DuPont. Mobil tried to take over Marathon Oil. Occidental acquired Cities Service. Texaco will take over Getty in the largest merger in history. Rumors now abound that Gulf and Atlantic Richfield are talking merger.

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The acquisitive tendencies of the petroleum companies have been most evident in the oil industry itself and just as significantly, but less publicly in energy and minerals. Fifteen of the nation's largest coal companies are now owned by petroleum companies, many of which control significant natural gas resources and are active in uranium mining and the nuclear power field. Texaco, for example, as a result of its merger with Getty, will become the world's second largest oil company and the largest domestic natural gas producer, and will be acquiring Getty's uranium mines and coal companies.

The national coal, petroleum, natural gas and uranium markets are dominated by a handful of energy giants and conglomerates. I respectfully submit to the members of the Subcommittee on Securities and the Subcommittee on Telecommunications, Consumer Protection and Finance that one of the most urgent questions in the area of economic concentration is whether the formation of petroleum-natural gas-nuclear energy megacompanies serves the national interest. Is it prudent that more and more of our nation's energy options be controlled by a shrinking group of multinational megacompanies, their concern focused on global profits and "global efficiency" rather than on development of American energy resources and American energy independence?

Concentration in the energy industry increases the risk of uncompetitive behavior. Collusion is more likely. Producers may hold back on the development and production of one resource in order to promote another resource. Markets are manipulated. Innovation decreases. Neither reserves nor exploration are increased by takeovers.

The UMWA believes that there are unique public policy questions raised by increasing concentration in the energy field. At the same time, these mergers and acquisitions

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partake of the same characteristics as mergers and acquisitions in other industries in terms of their effects on credit markets. Briefly, we believe that the huge cash outlays and borrowings involved in takeovers are a diversion of capital from "real" investments investments which produce enduring value in terms of exploration, development, research and innovation, equipment purchases, plant construction, job creation, training, improvements in health, safety and working conditions. Instead, the capital which is diverted has created and is supporting a new industry of takeover specialists industry which produces no product of enduring value.

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The UMWA supports efforts, such as those contained in H.R. 1742, to provide the Federal Reserve Board with authority to disapprove credit commitments of more than $100 million used for mergers. The proposed legislation appropriately calls for consideration of the employment effects of mergers. Its adoption and implementation should help to ease credit available not only for investment, but for individual consumers, for small businesses, for housing and agriculture.

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Both H.R. 1742 and H.R. 3561 emphasize the public interest, including but not limited to -- the effects of mergers on employment generally and the employees of affected companies. This approach is realistic, reasonable and fair. The SEC Advisory Committee report, quite unrealistically, assumes that a regulatory scheme which does not even consider the interests of employees or of consumers, but only of security holders, can serve the public interest. The Advisory Committee urges that regulation of takeovers should be neutral it should not promote or deter takeovers.

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No regulatory scheme is neutral: it serves someone's definition of the "public interest." Clearly, when the issue is multi-billion dollar companies, thousands of jobs, the nature and pricing of a range of consumer services and goods, the public interest can not be so narrowly defined.

I commend the Subcommittee on Telecommunications, consumer Protection and Finance, and the Subcommittee on Securities, for undertaking a timely re-examination of how the public interest is served by merger activity and the adequacy of existing regulatory definitions of the public interest.

RLT: fw

Sincerely,

Richard L. Trumka

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