PITTSTON COAL GROUP MAY GAIN STRENGTH IN WAKE OF STRIKE

PITTSTON COAL GROUP MAY GAIN STRENGTH IN WAKE OF STRIKE

The strike at Pittston Coal Group Inc. is over. Now comes the tough part.

With a union contract that appears to give it advantages over other major coal producers, Pittston will try to increase its profitability and prove that the millions of dollars it lost during the 10-month strike were worth it."It should cause them to be much more competitive," said Paul Barberry, general counsel for A.T. Massey Coal Co. "But what it means in dollars and cents, we don't know."

Mike Odom, Pittston Coal Group president, said it was too early to make detailed projections about the company's performance under the new United Mine Workers of America contract. Pittston's union miners in Kentucky, Virginia and West Virginia ratified the contract last week.

"This agreement will open up new markets that were previously closed to us because of cost constraints," Mr. Odom said through a spokeswoman.

Pittston said it had renewed most of its contracts to sell coal to steelmakers in 1990. Pittston sells about 65 percent of its coal to foreign steel mills, primarily in the Pacific Rim.

Pittston's main competitors are Australian coal producers, as well as other U.S. exporters that operate in central Appalachia. The U.S. competitors include Massey, Westmoreland Coal Co., Consolidation Coal Co. and Island Creek Corp.

Westmoreland and Consolidation signed the 1988 contract between the UMW and the nation's major Eastern coal producers. Island Creek signed a separate agreement with the UMW that contained more generous job security provisions, while Massey is primarily a non-union operator.

Pittston's contract grants it several advantages over other unionized companies, said coal industry officials and analysts.

One of the most important is said to be flexible scheduling. Pittston's miners will work rotating shifts, 24 hours a day, all week, except for the Sunday day shift.

That means Pittston's longwalls, huge, expensive machines that can mine a ton of coal every few seconds, rarely will be idle.

Mr. Barberry said Pittston's ability to operate the longwalls continually is one of the contract's main advantages. Massey does not have longwalls, which can mine coal more efficiently than other methods.

Marc Cohen, analyst for Kidder, Peabody & Co., cautioned that it would take time for miners to adjust to the new schedules. Until then, Pittston may not reap any advantages, he said.

But if the schedule works, Pittston could experience "mind-boggling" increases in productivity, Mr. Cohen said.

Pittston no longer will make payments into the United Mine Workers 1950 health fund, which provides benefits to all pre-1976 coal industry retirees. Instead of making payments of $2.17 for each hour worked by its union miners, Pittston will make a lump sum payment of $10 million.

Cecil Roberts, vice president of the union, said that $10 million actually would amount to $14 million when interest income is added.

Mr. Roberts said that Pittston would have paid $21 million over the life of the four-year contract if it had stayed with the fund.

Island Creek, based in Lexington, Ky., said it may seek a similar arrangement when its contract with the union expires in 1993.

To cover medical expenses, Pittston will give each worker $500 every six months. The worker must pay for the first $500 of medical expenses every six months but can keep what's left. The idea is to give workers an incentive to shop for lower-cost health care.

Mr. Cohen said the contract overall gives Pittston "a potential to dramatically cut itscost structures."

It is difficult to put a figure on what those cost savings could be. Some analysts have said that Pittston was claiming that it would save $5 for each ton of coal produced. Mr. Cohen put the amount closer to $3 a ton.

A profit would be a welcome change at Pittston. The coal group had an operating loss of $26.9 million in 1989, largely because of the strike.