Kaiser making a fresh start

Kaiser Aluminum Corp. becomes a new company today.

It has new owners. New stock. A new balance sheet. A new relationship with the Steelworkers union. Most importantly, it has a new outlook after surviving the corporate equivalent of purgatory.

Today the company crosses what Chief Executive Officer Jack Hockema calls a bright line and sheds the protections and restrictions of the bankruptcy it sought 4½ years ago.

Hockema said the company is poised to cash in on strong demand for specialty aluminum that is turned into parts for airplanes.

But for this new Kaiser, good financial performance is about much more than dividends for stockholders and bonuses for executives. Most of the company’s new stock will be held by special trusts designed to offset medical costs for Kaiser retirees and workers and to fund a new retirement program.

That’s a big deal for Spokane, which suffered job and tax losses during Kaiser’s stint in bankruptcy. The firm owed more than $3 million in local back taxes – much of it to the East Valley School District. It once employed several thousand workers in this area, but that number fell to fewer than 600 in the aftermath of the February 2002 bankruptcy filing. Kaiser still has thousands of retirees in the region who saw their medical coverage cut.

Former and much-vilified owner Charles Hurwitz is out.

One thing is unchanged, however: Kaiser’s name, which still carries industrial cachet just as precious as the aluminum that’s stretched, rolled, coiled and stacked at the company’s massive Trentwood rolling mill in Spokane Valley.

Some companies change their name to put bankruptcy behind them.

No chance, said Hockema. “There’s so much equity in that Kaiser Aluminum name with our employees and our customers. When I’ve (discussed changing names) to customer groups they’ve said, ‘Are you guys nuts? Why would you ever change this name?’ It’s a great name in American industry.

“We’re Kaiser Aluminum and we’re proud of the legacy.”

Arriving at today was a brutal accomplishment. Kaiser had been hemorrhaging cash for years, reneged on health care promises made to the retirees who helped build the company, and couldn’t seem to catch a break in the rollercoaster metals market.

Yet the company never gave up. Executives kept making deals and finding opportunities in a slumping market, while workers made deep concessions to keep the company in good stead with its customers, making and delivering top-quality aluminum.

The single-most difficult issue to overcome, Hockema says now, was asbestos. Exposure to the dangerous material made and used by Kaiser carried a legal liability estimated at more than $100 million.

“It’s been a slog” was how Hockema described the process of Chapter 11 bankruptcy.

Perhaps no town knows that more acutely than Spokane, with which Kaiser has been associated for decades. It’s a relationship Hockema acknowledges, a nod to his past as a Trentwood boss.

The federal government built the Mead smelter and the Trentwood rolling mill in 1940 after damming the Columbia River in Grand Coulee and generating enough electricity to help industrialize the Northwest.

The legendary Henry J. Kaiser collected the properties after World War II and never looked back.

It’s part of the reason Hockema said he is pleased to report that the company intends to remain a strong part of Spokane’s economy.

Analysts don’t often track companies mired in bankruptcy. The failure rate is too high.

But there’s little doubt that Kaiser has an opportunity to make some money selling to Boeing Co. and Airbus.

“We’re in the sweet part of the market and it looks like it has some legs,” Hockema said, “but I’ve been in this business for four decades and know that aerospace goes up and down.”

The trick at Trentwood will be to keep running hard. Kaiser is investing about $75 million in new machinery at the plant designed to make aluminum plate.

Competition from aluminum makers in China and Russia will pressure prices. Kaiser has to refine its manufacturing practices and drive up the quality to beat back the challenge. It also needs to maintain and improve on its already strong reputation of being able to deliver aluminum on schedule.

“The whole team (in Spokane), and not just the management, knows the challenge,” Hockema said.

He said Kaiser continues to pay reasonable wages and envisions warmer relations with the Steelworkers, who will be able to appoint several members to the company’s board of directors.

“Labor relations are a two-way street,” Hockema said. “I believe we have learned to disagree without being disagreeable.”

He acknowledged the always tense and often hostile interactions that the company had with labor. A brief strike, followed by what was later deemed an illegal lockout of Steelworkers for nearly two years, poisoned the company’s labor relations.

It’s why, he said, “what’s happening now at Trentwood is especially heartwarming to me.”

When the lockout ended, workers returned to a different plant with big plans for change. Layoffs accompanied Kaiser’s exit from making aluminum cans, lids, tabs and brazing sheet.

“We went through six or seven years of really, really, really tough times,” Hockema said. “That entire organization was just tremendously resilient up there. It’s amazing to me that every time we hit them with another punch, they’d fall back for a minute, but then they would just belly up and just do what they had to do to make it work.”

Eventually, Hockema said, management got it right at Trentwood by focusing on what it could do best and making the investments on new machinery.

“It’s gratifying,” he said.