Tuesday, January 14, 2003


Kaiser gives up on Mead smelter
Company says it can't afford to keep plant ready for restart
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John Stucke
Staff writer

File - The Spokesman-Review
Just five years ago, Kaiser's Mead operation spent $750 million a year in the local economy and paid 1,200 workers.

Kaiser Aluminum Corp. now appears unlikely to ever reopen its Mead smelter.

The possible financial cost: the loss of 1,200 jobs and $750 million coursing through the regional economy.

Kaiser officials always sounded optimistic during the past two years when asked whether Mead would restart after it was idled in December 2000. It kept a skeleton crew of about 25 people employed at the expansive smelter -- ready to pull the trigger on restart should aluminum prices rebound.

But on Monday, CEO Jack Hockema said the company could no longer afford the wait. The company may take a write-down in its smelting assets of up to $143million.

"We had previously hoped that conditions would be right for at least a partial restart of Mead in the first quarter of 2003," Hockema said. "But that does not appear to be likely."

Keeping Mead ready for restart was costing Kaiser about $4 million a year.

Hockema didn't rule out the possibility that the World War II-era
smelter may someday make metal again.

For now, though, Kaiser is unplugging amid the punishing market conditions of expensive electricity and low aluminum prices.

Security guards, an engineer and an environmental manager will be among the five people still reporting to work.

Just five years ago, Kaiser's Mead operation spent $750 million a year in the local economy and paid 1,200 workers. Each Kaiser Mead dollar circulated through the region three times to make the plant a $2.25billion financial player, said Rich Hadley, president of the Spokane Regional Chamber of Commerce.

"People wonder why we took a dip around here," Hadley said. "That's why."

The slow and public unraveling of Kaiser may have dampened the economic shock, but Hadley said losing the Mead plant is the equivalent of shutting down a hospital or closing Fairchild Air Force Base.

"The point is, we're still standing," Hadley said. "What happened to Kaiser is why we're so happy that (Triumph Group Inc.) bought the Boeing facility rather than having it close."

Mead's indefinite closure did not come as a surprise to Steelworkers.

Local 329 union president Dan Russell said his membership is waiting to see whether the federal Pension Benefit Guaranty Corp. will take over Kaiser pension plans, an action he fears could come before the end of the month.

If so, some laid-off workers may lose $400 a month in early retirement supplements, he said.

"We're realists. We knew this was coming," Russell said. "The only thing I'm afraid of is that Kaiser has some inside information and they're making this announcement already knowing that the PBGC is taking over their pension plans and wiping out early retirement benefits."

Kaiser spokesman Scott Lamb said only that about 250 longtime Steelworkers are eligible for early retirement benefits because of the closure.

Despite the difficulties at Mead, former company vice president Pete Forsyth said the smelter may still have a future -- albeit not with Kaiser.

"The smelting business got too hard for Kaiser once the energy market went goofy," Forsyth said. "I do think some kind of new entity could make a go of it. I believe it's still possible."

He said Mead would have to operate as a swing plant, a smelter with enough flexibility with power and labor contracts to run when prices are right.

The time when Mead ran eight potlines and produced 200,000 metric tons of aluminum each year are gone. The Trentwood rolling mill quit producing aluminum can metal, drastically cutting the amount of aluminum rolled each year.

Focused on specialized aerospace metal orders, Trentwood rolls a fraction of the aluminum it once did.

To make Mead work, Forsyth said, Kaiser would have to sell the plant cheap and retain responsibility for environmental cleanup at the site.

Too much effort and cooperation?

"I don't know. What's the alternative?" said Forsyth, who spent 28 years with Kaiser and was the company's leading Spokane executive before he was laid off last year. "It would require a lot of commitment to bring all parties together ... but it's not too late."

Kaiser, weighted with $3.1 billion in debts and liabilities, filed for bankruptcy protection last February.

It owes Spokane County $2.2 million in back taxes, said deputy treasurer Bob Wrigley.

The tax bill for Mead was roughly $760,000. Of that, about $292,000 is due the Mead School District.

Wrigley said the county has a bankruptcy claim filed.

Also owed money is the Bonneville Power Administration.

Kaiser severed its contract with Bonneville, forcing the agency to file a $70 million to $80 million claim, said spokesman Ed Mosey.

That power was to be used for metal making at Mead.

Kaiser sold its Tacoma smelter last month to the Port of Tacoma, which has plans to raze the buildings and expand shipping capabilities.

The Mead and Tacoma actions have no effect on the Trentwood rolling mill, Lamb said.

Trentwood has about 475 hourly and salaried employees.

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