The future takes flight at Trentwood
The long nightmare for Kaiser Aluminum Corp. is nearing its end. Although the company will not emerge from bankruptcy until early next year, recent announcements signal a promising future, particularly for the Trentwood rolling mill.
For starters, Kaiser plans to invest $75 million at Trentwood over the next few years. The money will buy furnaces, an ultrasound inspection system and heavy gauge stretcher, a machine that improves the flatness of aluminum plate up to 10 inches thick. The process relieves internal stress.
The reason for adding the new equipment became apparent almost immediately. Airbus, the European airplane manufacturer, will add the hefty plate to the other sheet and plate it already buys. Boeing Co. has been a long-time Trentwood customer.
And last week Kaiser disclosed the directors who will control the reorganized company, with present president and chief executive officer Jack Hockema serving as chairman. Among the future board members are George Becker, former president of the United Steelworkers of America, as well as the union’s former counsel, Carl Frankel. Trusts that will benefit Kaiser retirees will hold two-thirds of the common shares of the new Kaiser.
The union also picked former U.S. Rep. Jack Quinn, R-N.Y., who is now a lobbyist, and Brett Wilcox, former chief executive officer at Golden Northwest Aluminum. Other members come with extensive corporate and academic backgrounds. Overall, the group will be a significant upgrade from the sad gang that delivered Kaiser to its creditors.
Most encouraging of all the news is Kaiser’s third-quarter earnings report. This week, the company reported operating income of $15 million, with the division that includes Trentwood checking in with a $24.5 million net, bringing the nine-month total for those operations to $62.7 million. Net income for the quarter was $11.9 million. With all the adjustments made as Kaiser worked through bankruptcy, comparisons with prior periods are difficult. But income is income.
For years, Kaiser has ducked profitability as if it were a summons. The company declared $3.1 billion in liabilities when it filed bankruptcy in February 2002, and debt service has been an anchor dragging Kaiser down for at least the last 20 years. After reorganization, the burden will be a feathery $50 million. Debt service will no longer be the crushing handicap that limited ongoing reinvestment in new equipment.
Unfortunately, the Mead smelter and its 1,000 jobs are history, as is Kaiser’s other Northwest smelter in Tacoma. High electricity prices since 2000 have nearly wiped out that segment of the region’s aluminum industry. The Mead property has been sold, its potlines scrapped out.
But roughly 600 jobs have been preserved at Trentwood, which has rolled aluminum ingots into strips, sheets and plates for the aircraft industry since World War II. More workers may be added to tend the new equipment and fill the new orders. The sprawling plant, one of the largest under roof in Washington, will remain a contributor to the coffers of local and state governments, although Olympia’s take will be significantly lower.
Not only will the expenditures for Trentwood’s new equipment be exempt from Washington’s sales tax, the state’s business and occupation levy will be reduced considerably because Trentwood benefits from relief the Legislature gave aerospace manufacturers in 2003. Although directed at Boeing, which at the time was pondering where to assemble the 787, the lower rates also apply to Boeing suppliers. Or Airbus suppliers. Kaiser will be allowed to credit 10 percent of its property taxes against its B&O obligations. Also, the B&O rate applicable to aerospace companies was reduced by 12 percent as of Oct. 1, and will fall 40 percent below the standard rate the day Boeing begins 787 production.
If we must have targeted tax relief in order to keep vital industries — and that’s a strong if — it’s nice when a Spokane company or two strays into the bull’s-eye.
The rebound in the commercial airline business could not have come at a better time for Trentwood, or for other Spokane-area makers of aerospace components, for that matter. A few years ago, Kaiser managers decided to tie Trentwood’s future to that of the aircraft industry. Other operations, like the production of aluminum can sheet, were discarded. Those decisions eliminated hundreds of jobs. A slowdown in aircraft orders did nothing to ease the pain.
Today, that call looks much better for Kaiser, Trentwood and Spokane. Here’s to the future.