In re Parrot Packing Co., Inc.
| Decision Date | 02 August 1983 |
| Docket Number | Bankruptcy No. 83-10127,Misc. No. FM 83-38. |
| Citation | 42 BR 323 |
| Parties | In re PARROT PACKING COMPANY, INC., Debtor. |
| Court | U.S. District Court — Northern District of Indiana |
Grant F. Shipley, Fort Wayne, Ind., for debtor.
John R. Burns, III, Fort Wayne, Ind., for Fort Wayne National Bank (secured creditor).
Thomas Scherer, Bamberger & Feibleman, Indianapolis, Ind., John C. Theisen, Gallucci, Hopkins & Theisen, Fort Wayne, Ind., for Creditors' Committee.
Irvin M. King, Chicago, Ill., for Local Union.
This bankruptcy matter is before the court on the "Application of Creditors' Committee to Require Debtor to Reject Collective Bargaining Agreement or Alternatively for Authority to Reject Collective Bargaining Agreement on Debtor's Behalf" filed July 7, 1983. On July 11, 1983 the court granted a "Petition for Withdrawal of Reference" from the bankruptcy court pursuant to Local Rule 28(c)(2) for the limited purpose of hearing the above referred to application. Hearings were conducted on July 21 and July 27, 1983. Represented at the hearings were the debtor in possession, the Creditors' Committee, the Fort Wayne National Bank, and Local 280, United Food and Commercial Workers International Union, AFL-CIO. Having heard the evidence and being duly advised in the premises, the court now enters the following findings of facts and conclusion of law.
1. Parrot Packing Company, Inc. is the debtor in possession in Bankruptcy Cause No. 83-10127 in the United States Bankruptcy Court for the Northern District of Indiana, Fort Wayne Division, having filed a voluntary petition for relief on February 18, 1983.
2. The official Creditors' Committee of Parrot Packing Company, Inc. represents many creditors in the reorganization and is a party in interest under 11 U.S.C. § 1109(b).
3. The Fort Wayne National Bank is a creditor having a security interest in the bulk of the assets of Parrot Packing Company, Inc.
4. Local 280 of the United Food and Commercial Workers International Union, AFL-CIO, represents the hourly employees of Parrot Packing Company, Inc. other than managerial, supervisory, sales and clerical employees.
5. Parrot Packing Company is a packing company in the business of processing and selling consumer meat products, including hot dogs, sausage, cold cuts and hams. These products are distributed principally in northeast Indiana, with concentration in the Fort Wayne area.
6. The company's business is seasonal. The summer months are generally the best months for the sale of hot dogs, cold cuts, and smoked meats, while the holiday periods (Easter, Thanksgiving and Christmas) are generally the best months for the sale of hams.
7. Parrot Packing Company owns a single facility in Fort Wayne, Indiana, originally constructed in 1923 and added on to from time to time since that date.
8. Parrot Packing Company is a Subchapter "S" corporation, the shares of which are owned by approximately eleven different people. The shareholders last received a dividend on their shares in 1980, the last year in which Parrot Packing Company earned a profit.
9. Since 1980, Parrot Packing Company suffered continual losses from its operations. In 1981 its losses from operations were $122,738. In 1982, its losses from operations were $606,566. During the first six months of 1983, the company's losses have been in excess of $308,250.
10. Conscious of these staggering losses, Parrot Packing made several efforts to cut expenses. One such effort involved the closing of a hog slaughtering operation in October of 1982, since that operation turned a net loss of approximately $600,000 during that year.
11. Prior to the closing of the hog slaughtering operation, Parrot Packing had attempted to reduce losses through a reduction in its labor costs. Beginning in 1981, the company and the union met to discuss possible concessions, whereby Parrot Packing could contain its labor costs. At the time of those initial negotiations, there were approximately one hundred workers actively employed in the bargaining unit at Parrot Packing Company, represented by the union. Through the negotiations, the union agreed to forego certain scheduled pay increases, including two cost-of-living adjustments. At that time, no wage reductions were negotiated, and between 1981 and October of 1982 one cost-of-living increase was granted pursuant to the collective bargaining agreement.
12. In October, 1982, the then existing collective bargaining agreement expired, and the company and the union negotiated a new collective bargaining agreement for the period between October 10, 1982 through October 12, 1985. That agreement, though still unsigned, is being adhered to by the parties. The union made many concessions in the new agreement. The union granted wage and benefit concessions totaling $2.04 per hour. Under the new wage scale, the base wage rate is $8.00 per hour. The average wage rate is $9.06 per hour and the average employee compensation (including fringe benefits) is $10.91 per hour. The union gave up one holiday, Columbus Day, and also gave up four hours of vacation pay. The union further decreased funeral days from five days to three days. The union further gave up its free hot lunch program and five minutes per day allocated for clothes changing.
13. The number of workers actively employed in the bargaining unit at Parrot Packing Company has consistently declined since the closing of the hog slaughtering operation. Prior to the closing of the hog slaughtering operation, there were in excess of one hundred workers actively employed in the bargaining unit. On October 10, 1982, there were sixty union employees actively working. At present there are approximately forty-three union employees on active status and another thirty-nine employees on lay-off status.
14. Aside from the concessions from the labor union, Parrot Packing has also reduced some of its labor costs with respect to its other non-union employees. These non-union employees include seven managerial employees; seven supervisory employees; five sales employees; and five clerical hourly employees. Prior to Parrot Packing Company's efforts to reduce labor costs, which became of critical importance with the closing of the hog slaughtering operation in October of 1982, there were eleven managerial employees; eleven supervisory employees; seven sales employees; and seven clerical hourly employees. Thus, from October of 1982 to July 22, 1983 the number of non-union employees at Parrot Packing Company has been reduced from thirty-six such employees to twenty-four employees. The duties of the non-bargaining unit employees whose positions were eliminated during this period were assumed by the remaining managerial or supervisory employees, without additional compensation. In October of 1982, Parrot Packing Company imposed a ten per cent pay reduction on its managerial salaries. Further, on July 1, 1983, there was a 19.8% reduction in total compensation for managers, 3.92% of which was in the form of withdrawal of automobiles previously leased by the company for personal use by managerial employees.
15. While Parrot Packing Company has reduced its labor costs with respect to its non-union employees by eliminating some positions and reducing managerial salaries, these cuts have not been as substantial as those suffered by union employees. This can best be seen in terms of a percentage between what the employees received in total compensation on October 10, 1982 and what they were receiving in terms of total compensation as of July 22, 1983. Between October 10, 1982 and July 22, 1983, principally as a result of the July 1, 1983 reduction, the monthly average compensation for managerial employees had dropped from $2,938 per month to $2,607 per month meaning that the average compensation for managerial employees on July 22, 1983 was 88.73% of the amount received as of October 10, 1982. A markedly greater reduction was borne by the union employees. Between October 10, 1982 and July 22, 1983, the average monthly pay of union employees had declined from $1,468 per month to $1,086 per month, meaning that the average pay for union employees on July 22, 1983 was 72.49% of the average earned as of October 10, 1982. In contrast, all non-union employees, with the exception of managerial employees, were receiving higher average monthly compensation on July 22, 1983 than they had on October 10, 1982. During that period, supervisory personnel went from an average monthly rate of compensation of $1,636 to $1,660 for an increase of 1.46%; sales people went from an average rate of compensation of $1,153 per month to an average monthly rate of $1,160 for an increase of .061%; and hourly/clerical personnel went from an average monthly rate of $828 per month to $935 per month for an increase of 12.92%.
16. Notwithstanding the reduction in wage and salary expenses, Parrot Packing Company continues to incur losses. This had led to understandable concern on the part of certain creditors and in particular the Fort Wayne National Bank.
17. The Fort Wayne National Bank is the principal commercial lender and secured creditor of Parrot Packing Company. Other than the lessors of certain equipment, Fort Wayne National Bank is the sole secured creditor of Parrot Packing Company, having security interests in real estate, buildings, fixtures, equipment, inventory, and accounts receivable.
18. As of February 18, 1983, Parrot Packing Company owed the Fort Wayne National Bank approximately $700,000. The balance presently due and owing to the bank has grown to approximately $850,000. As of early June, 1983, the assets of the debtor in which the Fort Wayne National Bank has a security interest has a liquidation value of between $812,149.76 and $1,292,249.50.
19. Though current, as of February 18, 1983, in its payments to general creditors and in its principal and interest...
To continue reading
Request your trial
-
In re Fontaine, Bankruptcy No. 3-83-492.
... ... See also, Victory Highway Village, Inc. v. Weaver, 634 F.2d 1099 (8th Cir.1980) ... The debtor ... ...