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FULL TEXT OF LETTER TO UAL BOARD OF DIRECTORS
FROM INTERNATIONAL PRESIDENT R. THOMAS BUFFENBARGER
INTERNATIONAL ASSOCIATION OF MACHINISTS
AND AEROSPACE WORKERS
CO United Airlines
October 23, 2001
By Hand Delivery
Board of Directors UAL Corporation
World Headquarters
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Dear Members of the Board:
We live in challenging times. The very fabric of our country has been,
and continues to be, challenged by terrorists whose callous disregard for
human life has shattered the dreams of countless numbers of families and
left deep scars among all of us that will never heal. Our economy, already
reeling before September 11th, reflects the uncertainties and anxieties of
our citizenry. As this Board knows, these challenges have hit the airline
industry especially hard, both in terms of the financial losses that the
carriers have experienced and in terms of the extraordinary dislocation
and economic hardship suffered by the thousands upon thousands of
employees who have lost their jobs in recent weeks.
We are, no doubt, at a crossroads. The weak will dwell on negatives,
counsel defeat and never rise to face the challenges that confront us. The
strong will balance their understanding and analyses of reality with the
type of optimism required in order to reverse the downward trends
reflected in today's economy. Even more important, the strong will lead.
As President of the International Association of Machinists and Aerospace
Workers, AFL-CIO, and as representative of more than 40,000 current or
recently laid-off employees of United Airlines, it is apparent to me that
UAL and United Airlines suffer from a woeful lack of strong senior
leadership.
If UAL and United Airlines had strong leadership:
* UAL's stock would not be at the lowest price since 1988;
* Lines of communication would exist that would enable management and
labor to partner in finding solutions to the challenges that confront our
company;
* The Chairman's horribly timed and poorly conceived October 17th letter,
and the resulting 21% drop in UAL's stock price could have been
avoided;
* Repeated warnings that sensitive documents are routinely leaked from
World Headquarters and other UAL locations would not be disregarded;
* The approval by Congress of an airline stabilization bill and the
explicit recognition by our lawmakers of the hardships confronting the
airline industry would not have been followed by an immediate and
substantial downpayment on luxury business jets from a foreign
manufacturer;
* The failed merger with US Airways would not have been so woefully
mismanaged.
The Chairman's October 17th letter, itself, raises an extraordinary
number of profound issues concerning UAL's current leadership. We trust
that the Board will demand that Chairman Goodwin answer, at the very
minimum, the following questions:
* At a time when management is spending precious advertising dollars to
launch a new campaign featuring the heartfelt, post-September 11th
emotions of United employees, for the very purpose of restoring the
public's confidence in flying on United, why would the Chairman announce
that "...we are in a struggle just to survive" and why would he
publicly declare that if the "bleeding" is not stopped soon,
"United will perish sometime next year?" As we all know,
expressions of doubt about a carrier's financial viability can become a
self-fulfilling prophecy.
* At a time when United's remaining employees are justifiably anxious
about job security, why would Chairman Goodwin tell them that
"nothing is sacred or off-limits?" Given the massive number of
layoffs since September 11th, management should be doubling its efforts to
assure that the employees who remain on the payroll feel secure so that
they can perform their responsibilities to the best of their abilities.
Threats like this do nothing but destroy morale among the very employees
who are critical to United's future success.
* It had to be apparent to Chairman Goodwin that his letter would be read
by the financial press and by financial analysts. Indeed, management
concluded that the letter was so newsworthy from a financial point of view
that the letter has been filed with the SEC and posted on EDGAR. Given the
exposure that this letter was bound to receive, why would Chairman Goodwin
say that "we are literally hemorrhaging money?" Is this the way
Goodwin speaks when he is addressing financial analysts? How could the
Chairman have ignored the reality that his letter to employees would be
read, interpreted, and analyzed by the financial community.
* Ratings by rating agencies are very important to United, even in today's
low interest rate environment. I am sure that those agencies are focused
on the airline industry in general, and on United (among others) in
particular. Given these sensitivities, why would Chairman Goodwin state:
"Our number one priority now is to get United into a financial
position that will allow us to continue operating. We are not there
yet."? It is impossible to see how such a statement could help
United's stock price or debt ratings. I cannot understand why Chairman
Goodwin would volunteer this information absent a duty to disclose.
* Statements which question an entity's continuing viability can have
independent legal significance in a variety of contexts. Before the letter
was leaked, did anyone check with UAL's auditors or accounting staff to
confirm that Chairman Goodwin's hyperbole would not lead UAL's auditors to
qualify the opinion that they will be asked to express on the 2001 annual
financial statements? Before the letter was leaked, did anyone review
UAL's and United's credit documents to assure that Chairman Goodwin's
admissions do not allow third parties to accelerate United's obligations
under such documents?
* This single letter has had wide repercussions within the financial
community and within United's work force. No single person should be able
to wreak such havoc, given the system of checks and balances that exist in
any corporation, let alone in United's tightly drawn governance structure.
Was the Board of Directors consulted about this letter before it was
disseminated? I am not sure which would be worse -- discovering that
Chairman Goodwin acted unilaterally or learning that the Board was aware
of the letter before it was published and failed to stop it.
* Why did Chairman Goodwin write the letter in the first place? This may
very well be the most perplexing question of them all. If he felt that he
had a responsibility to disclose financial information to the market, he
should have communicated directly with the financial community. Perhaps a
more conventional approach would have avoided some of the freefall in
UAL's stock price that we all watched last week. If he felt that the
letter was necessary in order to motivate United's remaining employees to
improve their individual performance, he should have realized that a
letter predicting the doom of the airline could easily have the opposite
effect. My sense is that employee morale at United is at an all time low,
due in large part to the employees' lack of confidence in Mr. Goodwin and
United's senior management. If Goodwin felt that his message would improve
United's position when stalled negotiations with the IAM resume in the
next few weeks, he completely underestimated the will and resolve of this
Union: we will not bend in response to the alarmist rants of a
disenfranchised chief executive officer who is clearly not up to the task
of crisis management in a time of crisis.
On October 17th, I responded to Jim Goodwin's letter by echoing what I
have heard throughout the United system. I stated then, and reiterate now,
that United Airlines will continue to fly tomorrow, next month and next
year. It will continue to deliver passengers safely, in comfort and on
schedule. There are nearly 100,000 United Airlines employees who will see
that it does exactly that. It is apparent that Chairman Goodwin has lost
the confidence of the constituencies to which the UAL Board is
responsible. The public shareholders have expressed their dismay, moving
the stock price to historic lows. Employee-shareholders wake up each day
to the grim reality that the tangible economic sacrifices that they made
in the past and continue to make have come to naught. Employees in and out
of the ESOP have called for Goodwin's resignation or removal. Perhaps it
is only United's competitors who favor Mr. Goodwin's continued
stewardship. At this juncture, it is incumbent upon the Board of Directors
to take decisive action. On behalf of the IAM, I call upon the Board of
Directors to:
* Immediately commence an executive search to identify Chairman
Goodwin's successor, with a goal of removing him as soon as an acceptable
leader can be selected in accordance with UAL's governance procedures.
This can and must be a top priority. * Direct legal counsel to determine
whether "cause" exists for Mr. Goodwin's termination under his
employment agreement and to assess whether Mr. Goodwin's statements last
week have compromised United's positioning under any material
agreement.
* Direct management to embark upon a program of damage control to shore up
the confidence drain evident in the financial community.
* Establish a senior level "Return to the Skies" committee, with
direct reporting responsibility to the Board of Directors, composed of
members of management, labor representatives and members of the flying
public, and charge that committee with the responsibility of making prompt
and practical recommendations to the Board as to how United can
effectively encourage the public to resume their use of United Airlines.
IAM General Vice President Robert Roach and I have requested Scotty Ford
and Randy Canale, the leaders of IAM Airline Districts 141M and 141, to
serve on such a committee or appoint top-ranking delegates to represent
them on such a committee and to present such a committee with concrete
proposals as soon as the committee is formed.
Now is not the time to engage in lengthy, public debates. Now is not
the time for self-serving rhetoric designed to prop up one interest group
at the expense of other interest groups. Now is the time for action. There
is no question but that this Board will be judged by the manner in which
it responds to the challenges currently facing United Airlines. Your
constituents demand and deserve nothing less than decisive action to
select new management leadership for the airline, to restore the public's
confidence in the underlying strength of this franchise and to demonstrate
to the financial community that last week's statements of gloom do not
symbolize the manner in which this Board intends to respond to today's
challenges.
I look forward to prompt action by the Board.
Sincerely yours,
R. Thomas Buffenbarger
INTERNATIONAL PRESIDENT
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10/29/01