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Kaiser invests in future

Wed., June 20, 2007

Kaiser Aluminum Corp. will spend an additional $34 million on equipment for its Trentwood rolling mill to further increase its heat-treated metal plate production, the company announced Tuesday.

Unspecified new agreements with customers necessitate the equipment, a follow-up to $105 million in capital upgrades already under way in Trentwood, said company CEO Jack Hockema. He declined to elaborate on the type of equipment to be added or on any new Kaiser contracts, but said the agreements “do have sufficient length that it justifies us making additional investment.

“We’ve determined that, in fact, we have some customers who recognize that there was some additional need,” Hockema said, adding that the company has no plans to announce new contracts.

Both Hockema and the plant’s union leadership foresee a brighter future for Foothill Ranch, Calif.-based Kaiser, which emerged from bankruptcy last summer and plans to double its aluminum plate capacity through the expansion. The company makes aluminum products for the aerospace, transportation and industrial markets.

“Obviously, we’re making some big investments in Trentwood, and we wouldn’t do that unless we were confident we had a good total business situation there,” Hockema said.

Kaiser has added roughly 100 employees in Trentwood during the last year, increasing its workforce there to about 800, said company spokesman Geoff Mordock. That’s about double the number of workers in 2002, when Kaiser declared bankruptcy, he said.

The latest investment should create a few more jobs, Hockema said.

Dan Wilson, president of United Steelworkers Local 338, said the business is experiencing the “best conditions” he’s seen since he started there more than two decades ago.

“The business base is good,” said Wilson, who represents about 775 union members at the plant. “There’s customers out there.”

Wilson said he’s heard about new contracts, but also declined to comment in the interest of protecting workers’ jobs by keeping competitors in the dark.

Kaiser has ongoing contracts with companies like Airbus, Boeing and Lockheed Martin, some of which were enabled by earlier phases of the recent expansion.

The company posted $392 million in revenues for the fiscal quarter ending in March, and it had revenues of about $1.4 billion last year. Demand for industrial- and transportation-related products was soft, and the “primary engine for the growth compared to last year has been the expansion at Trentwood,” Hockema said.

“Aerospace and defense have been a very strong market for us here, and we’re very optimistic that this cycle has good legs to it and will extend out for a few years here,” Hockema said. “And that’s underpinning our expansion at Trentwood.”

Kaiser stock closed up 6.3 percent Tuesday, at $79.83 per share.

Hockema said Kaiser has been “closely monitoring” the need for further expansion since Boeing earlier this year said it was concerned about the industry’s heat-treatment capacity.

Kaiser already has added two horizontal heat-treatment furnaces, which strengthen aluminum by heating it to high temperatures and rapidly cooling it with water. That process can create “residual stresses” inside the metal, so the company stretches plates on a “stretcher.” A new stretcher and third furnace are expected to come online later this year, Hockema said.

The equipment announced Tuesday is expected to be operational by the end of next year. Hockema would not give details of Kaiser’s production capabilities at Trentwood.

Trentwood is Kaiser’s only sheet- and plate-producing operation.

“It’s really made a turnaround,” Wilson said of the plant. “It’s a whole different place, no doubt about it.”


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