Coal Industry Overview:

Respondingto WorldDemand and Competition

Focus: Meeting the ChallengePresentation

US EIA

US EIA

United States

US EIA

World Coal Snapshot -- 1999CountryReserves Prodn Exports

C.I.S. 241 (23%) 0.30 26.7U.S.A. 241 (23%) 0.91 53.0China 115 (11%) 1.03 37.4Austr. 91 (8.7%) 0.23 171.6Bt Bt Mt

U.S.

Consumer Prices for Fossil Fuels(Nominal Dollars per MM Btu)YearCrude OilNat. GasBit. Coal 1980 7.40 2.86 1.47 1985 7.62 4.61 1.70 1990 7.47 3.85 1.49 1995 7.26 3.81 1.37 1997 7.82 4.62 1.31

Mergers, Restructuring, Re-engineeringReverberating shock that has reshapedour business cultures -- and our workerscultures, in and out of work.

High Water Mark -- CoalOil embargo (1974) Boom* U.S. industry prospered* $90+/ton for some coals* $57 for Pittsburgh seam (J&L)* Record enrollments in miningBut ...

Beginning of trouble * Many new mines, new people* Inefficiency* Oversupply* Globalization of competition startingTurning point was ~ 1978

75 80 85 90 99 19.2324.5227.1425.1021.7617.21 FOB Mine Price(Current $/ton)202530U.S. Price of Coal: 1975-1999

U.S. Production, Numbers of Mines and Miners: 1979-99YearProduction# Mines*#Miners1979 592 MM 4,243 148,1211983 782 MM 3,337 175,6421986 890 MM 4,424 154,6451990 1,029 MM 3,430 131,306 945 MM 2,475 101,3221999 1,099 MM 1,828 82,937* Active mines only

Production Efficiency: 1975-1999 (Tons/employee-hour)YearUndergroundSurfaceOverall1975 1.19 3.26 1.811980 1.21 3.27 1.931985 1.79 4.32 2.741990 2.54 6.07 3.83 3.16 7.67 4.981999 4.6611.84 6.45

Summary of Driving Forces* Intense domestic competition* Global market* Labor-technology trade-off* Regulatory Pressures* Shareholder expectations* De-regulation

Changes in Methods/Equipment* More western surface mining* More longwall tonnage * More reliable, powerful, and productive equipment* Conventional mining disappearing* Deep-cut mining underground* Continuous haulage improved

Whose behaviors have changed?* Owners* Foremen* Executives* Engineers* Operators* Inspectors* Managers* Contractors* Labor Leaders* Miners

* Enforcement Agency Leaders* Academia -- in many ways

Impact on Workforce* Blue collar and white collar numbers

* Union affiliation (41% UMWA in 1994, only 24% of production)

* Increasing use of contractors

Some Emerging Realities* Deeper, thinner seams/ores

* More discontinuous reserves

* Even tougher competition* Conditions will degrade rather than improve* Fewer and more global companies

Key Issues for the Future* Nature and organization of work* Demographics of workforce* Distribution of workforce across sectors* Intensification of stress factors

Nature/Organization of Work* Fewer miners; doing jobs faster* More frequent repetitive motions* Performing broader range of tasks * Encountering more complicated conditions* Switching companies more frequently* Longer commutes* Working longer hours, more days

* Working more irregular off-shifts * High risk at small mines; contractors * Less time with family* Often, lower wages* Often, lack of health insurance* Transfer of stress from continuous improvement programsNature/Organization of Work

U.S. workforce demographics are changing, too. By 2005:* ~147 million workers

* ~ 28% minorities

* ~ 48% women

* ~ 40% age 45 or older

Work Stress* Americans are working more hours than ever before, with the greatest increases among women and working couples. * The average U.S. worker works 47 hours per week, with 20% working 49 or more.* Workers in the U.S. work 70 hours per year more than workers in Japan, and 350 more than European workers.

Work Stress* Even with the current strong U.S. economy, job insecurity among workers increased over the 1990s. * 1988 - 20% reported frequently being concerned about lay off.* 1997 - Worry rose to 40%* Companies often suffer decreases in profitability, productivity, and employee morale.

Expanded Role of ContractorsWhat do they do?* Site prep* Construction* Drainage* Trucker* Welding* Cleaning* Security* Painting* Weeding* Blasting* Drilling* Sampling* Maintenance* Electrical* Demolition* Reclamation

Job Redesign* General efficiency/excise waste

* Broader range of tasks for workers

* Expectations re-defined

* Technology affects workers

Work Practices* Tougher to keep up with production

* Watch after details better

* Maintain higher availabilities

* Systematic focus to improve

Greater Ergonomic Focus* Visible company programs

* Palletization of supplies

* Material handling devices

* Man-machine interfaces

Continuous Improvement Strategies* Company programs* Consultants* LMPCP* Re-engineering, restructuring, mergers* Management and labor behaviors impacted

Safety and Training* More workplace contact with miners

* Company programs+ back injury+ emergency prep+ accident repeaters+ compensation case oversight

Conclusions* Intense competitiveness will continue

* Changes in methods, equipment, and workforce structure will continue

* Behaviors of all groups will be impacted

* RULE: Do more with less but better