Kaiser Says Strike Costs $50 Million Labor-Related Expenses Contribute To Quarterly Loss Of $38.9 Million

Kaiser Aluminum said Thursday the United Steelworkers’ strike has cost the company about $50 million.

The cost was cited as the company reported a net loss of $38.9 million for the three-month period ending Dec. 31.

In a telephone conference with analysts, Kaiser CEO George Haymaker said that in addition to strike-related losses, the company lost $45 million on the value of a small mill in Nevada.

Haymaker said the $50 million in strike-related expenses kept the company’s facilities running with salaried employees and replacement workers and includes the cost of hiring a security force, housing temporary workers at hotels and at the plants, feeding them and training them. The total also includes lost sales volume from two idled potlines at Mead and one in Tacoma.

“We are naturally disappointed,” Haymaker said of the losses. But, he added, the costs of the strike and lockout that idled 3,000 workers at five Kaiser plants did not exceed company estimates. Excluding the labor trouble, Kaiser seems to be on track, he said.

“We do not expect those expenses (other than the curtailed potlines) to continue,” he told the analysts.

The strike was called when the Steelworkers’ contract expired Sept. 30, and it has idled about 2,100 hourly workers at the Mead and Trentwood plants. On Jan. 14, the strike became a lockout, imposed when Kaiser rejected the union’s offer to return to work under the old contract until a new agreement could be negotiated.

The poor fourth-quarter results dropped Kaiser’s annual earnings to just $600,000 compared with $48 million earned in 1997.

The Steelworkers Union said it’s not surprised to hear the strike had cost the company so much.

“The $50 million in strike costs dwarfs the cost of the union’s proposal,” said David Foster, the Steelworkers’ chief negotiator. “Had the company obeyed the law and negotiated in good faith with its employees, it would have avoided the strike and made substantial profits during the fourth quarter.”

The union said its proposal for improved wages, work rules and benefits through the year 2001 wouldn’t have cost the company $50 million.

“We have benefitted by the experience” of managing the plants without union workers, Haymaker told the analysts. Although the short-term cost of the strike was great, the company has learned how it can be more efficient.

The other blow to the company’s bottom line came in the decision to devalue a micromill operation set up in Reno, Nev. “Given the fact that we’ve not yet seen that micromill reach its full commercial potential, we have basically reassessed the value and lowered it to $25 million,” said Kaiser spokesman Scott Lamb.

The union said the write-off “is an admission that the project was a failure.”

News of the quarterly loss didn’t lighten the mood at the union halls.

“This stuff is tragic, if anything,” said Larry Strom, vice president of the union local for the Mead plant. “Nobody’s going to be happy that the corporation they’re working for is losing money.”

The company also said it intends to sell its 50 percent interest in AKW, a venture that designs, makes and sells aluminum wheels to Accuride Corp. The sale is another step in Kaiser’s reassessment of its businesses. “The natural owner of a business may be a company other than Kaiser,” Haymaker said.

He said the money from the sale will be used for other company priorities.

Kaiser’s stock closed Thursday at $4.94, down 31 cents.