While the rest of the local journalism world spent its day on Coleman-Franken, I returned to my familiar haunt: the Strib's bankruptcy case. Monday, the paper's Teamsters drivers Local 638 filed its response to the company's plan to void its labor contract over a pension stalemate.

This is a fairly big deal, since the drivers have authorized a strike if Judge Robert Drain agrees with management, and that might be the final straw for the struggling paper.

Management argues that pension contributions must be stopped or lenders won't write down $396 million in debt and free the paper from Chapter 11. However, the drivers say their response — a strike — will kill the company by other means.

The drivers reveal that the International Brotherhood of Teamsters has approved the potential strike. That ratchets up pressure on Teamster pressmen and drivers to honor the picket line, even though the latter unions have agreed to cuts. (The drivers would receive $200-$300 a week in strike benefits as a result of the International's endorsement.)

Teamsters pressmen and mailers will "honor any Local 638 strike and picket line," the drivers declare, relying in part on December declarations. "A local 638 strike is likely to have a devastating impact on the Star Tribune's ability to operate and in all likelihood will shut the paper down."

Bad faith with 92 percent agreement?
The company has said it can and will replace the drivers, but the union tries to convince Drain even that isn't easy, despite the economic climate.

"The delivery routes which the local serves are complex, and could not be easily taken over by an untrained group of employees," the filing states. "Indeed, in order to drive the Star Tribune trucks, a driver must have a commercial driver's license. This requirement would make it even more difficult for debtor to find qualified employees to work in place of the striking Local 638 members."

The Strib must persuade Drain the drivers have failed to bargain in good faith. The drivers bat away that notion, noting they agreed to cuts more quickly than other unions — swallowing 92 percent of the company's request. That works out to $4 million per year for the 200-person local, which the local claims is 50 percent higher per full-time job than other major unions have agreed to.

A case of 'corporate indigestion'
The union is playing on the fact that the pension freeze only frees up another $1 million a year for an operation that projects far bigger (but redacted) profits post-bankruputcy. The real sticking point is a resulting $20 million company liability for pulling out of the Teamsters' woefully under-financed Central States pension fund.

The company says lenders won't become owners with the $20 million lurking. If they can't shuck the liability, lenders could liquidate the paper. The drivers dismiss this as the mere burping of financiers trying to rid themselves of "corporate indigestion."

Drain can't wipe away the $20 million (which, by the way, can rise or fall depending on economic conditions). However, he can make it a "general unsecured claim," eligible only for table scraps after the secured lenders gobble what they can.

The filing details how much unsecured creditors stand to get post-Chapter 11: zero dollars. They would get 4 percent equity in the "new" Strib — split among Central States, unpaid vendors, other pensioners, etc.

The exact total of unsecured claims is blacked out, but the drivers say the $20 million Central States liability would produce a "20 percent penalty on unsecured creditors." That would equal $120 million of unsecured debt. If the post-bankruptcy Strib is worth $75 million, that 4 percent ownership interest would fetch a mere $3 million ... if you could find a buyer.

The bottom line is that Central States would get no cash up front to fill the Strib's share of the gaping hole, and perhaps 2.5 cents on the dollar if the fund can somehow cash out.

Evaporating pensions unique
The Strib also must sway Drain that the drivers' cuts are in line with what other workers take. The company's case is that it's freezing pension contributions for all workers. But the drivers say the effect is disproportionate.

Because Central States is so deep in the red, the local (104 full-timers and 80 or so part timers) would lose a collective $2.5 million in present-value benefits. That's a loss other Strib workers wouldn't suffer; their benefits would no longer grow, but the payout wouldn't shrink.

The company has proposed making up 80 percent of the losses for 23 senior or recently retired drivers. The union says not only will those drivers lose a fifth of what they had coming, but many more drivers will lose their entire pensions.

The drivers also say the company is overstating its pension contributions by wrongly counting roughly $3 an hour in wages workers have deferred over the years.

Drain may well look at all this and say, "Tough noogies, drivers — it's not the Strib's fault you were in a badly managed fund."

His ruling is expected after a scheduled Tuesday, June 9 hearing; the Strib's David Phelps notes that despite the sharply worded legal motions, both sides were still bargaining as of Monday.