Machinists Vow to Fight if United Workers’ Bid OKd

In the strongest language it has used so far, United Airlines machinists union Thursday urged the board of United’s parent firm, UAL Corp., to reject a $6.75-billion labor-management buyout.

Louis R. Schroeder, president of District 141 of the International Assn. of Machinists, said in a letter to UAL’s board that the $300-a-share proposal “jeopardizes the livelihoods of the work force and the long-term viability of the carrier.”

United’s management has tried to persuade the machinists to join the bid, which is also backed by United’s pilots union and by British Airways. Financing for the proposal was reviewed by UAL’s 13 outside directors Thursday.

The labor-management proposal would give employees a 75% stake in the airline. Management, including Chairman Stephen M. Wolf, would get 10%, and British Airways would get a 15% stake.

United’s flight attendants said Thursday that they have reviewed the proposal and might participate. But the machinists, United’s largest labor group, have opposed the buyout as unnecessary and too expensive.

Legal Challenge Possible

The machinists have said UAL is worth no more than $240 a share, and have questioned the airline’s ability to survive a debt-financed transaction. UAL stock, which has soared in recent weeks as a result of takeover and buyout talk, closed Thursday at $280.50, down $2.75, in New York Stock Exchange trading.

Schroeder, who represents 23,000 mechanics and other United ground employees, said that if the board approves the bid, the machinists will have “no alternative other than to take all actions available to aggressively protect our members against its negative implications.”

The machinists could mount a legal challenge to block the transaction, or they could strike after their contract becomes amendable next month. Financial sources said the possibility of a job action might make lenders think twice about financing a buyout without the machinists’ support.

The union has also talked to Texas billionaire Robert M. Bass and has said he is interested in a possible bid for the airline. He is believed to own about 2% of UAL’s shares.

Besides the labor-management bid, UAL has also received a $275-a-share offer from Los Angeles billionaire Marvin Davis. Davis indicated that he is not yet prepared to revise his bid because his staff is still reviewing confidential financial documents obtained from the airline this week. He had said he might consider a higher bid if warranted by the confidential information.

The labor-management proposal would reportedly be financed with $4 billion loaned by a consortium of banks led by Citibank and Chase Manhattan. The banks would additionally lend $1.3 billion to an employee stock ownership plan, which would own 75% of the airline’s stock.

In addition, British Airways would contribute $750 million in return for preferred stock, and the pilots’ union would contribute $200 million from its pension fund. It would also receive preferred stock in return. Management was reported to be planning a contribution of $500 million.

The pilots have also said they would contribute another $250 million in wage concessions and increased productivity, but the machinists contend that the figure is inflated. For example, $40 million of the pilot contribution is not cash, but is said to be credit for wages lost during a 1987 strike. The machinists do not think that lost wages should count as equity.