Massey blames high turnover rate for bad Q1

AP News
Posted: May 03, 2011 3:13 PM
Massey blames high turnover rate for bad Q1

The departure of miners for rival Appalachian coal companies contributed to a production shortfall of 1.2 million tons in the first quarter, Massey Energy Co. officials said Tuesday.

Turnover at the struggling coal company, based in Richmond, Va., reached nearly 19 percent in January, Chief Operating Officer Chris Adkins said during a conference call with analysts. Turnover dropped to 14.9 percent in April, but Massey still is about 360 miners short.

"In our underground operations, approximately 300,000 tons of the shortfall is the result of not being able to staff five sections," Adkins said. "We believe these turnover rates will decline."

Adkins attributed more than half the production shortfall _ 700,000 tons _ to underground mines. Another 400,000 was attributed to surface mines and the final 100,000 was due to shortfalls at contract operations.

Massey blamed uncertainty about its pending takeover by rival Alpha Natural Resources for the labor problem. Abingdon, Va.-based Alpha is buying Massey in a $7.1 billion deal due to close after shareholders of both companies vote June 1.

"People are just uneasy about the merger and whether or not they'll have the job," Adkins said.

Shares in Massey fell 3.9 percent to $65.07. Shares in Alpha fell 4.5 percent to $54.97 after the company's quarterly earnings missed Wall Street expectations, even as they more than tripled from a year ago.

Alpha officials told analysts during a separate call Tuesday that they're not troubled by Massey's retention problem.

"I haven't seen anything at all that scares us. I mean, clearly there is an anxiety," Alpha Chief Executive Kevin Crutchfield said. "If people just hang on and give us a chance, they will see that this was never about headcount."

At Alpha, turnover typically hovers in the 6 percent to 9 percent range, Crutchfield said.

"We experienced a little bit of a run-up in 2008, just because everybody was treating labor like it was going out of style. But, I think it is a function of the kind of work environment you provide your people, how you treat your people."

Poor productivity caused in part by the labor shortage at Massey contributed to the $7.7 million first-quarter loss reported on Monday. It was Massey's fourth consecutive money-losing quarter since the deaths of 29 miners in the April 5, 2010, explosion at its Upper Big Branch mine about 50 miles south of Charleston.

The blast is the deadliest to hit the U.S. coalfields in decades. It remains the subject of ongoing criminal and civil investigations.

Massey, meanwhile, may be able to turn anxiety at Appalachian rivals Arch Coal Inc. and International Coal Group to its advantage. Arch announced a $3.4 billion takeover of ICG on Monday.

"We may have the opportunity to use that same tactic now," Massey Chief Executive Baxter Phillips said.