Kaiser wants to cut off
Company says it can't afford pension, retirement
BY JOHN K. WILEY The Associated Press Jan. 13, 2004
SPOKANE - Kaiser Aluminum Corp., which
operated two aluminum plants here, asked a federal bankruptcy court yesterday
for relief from obligations to pay medical and life insurance for thousands of
retirees and dependents and to end its underfunded pension
The United Steelworkers of America, which represents
employees at seven Kaiser facilities in the United States and Canada, criticized
The union estimates its retirees would lose health insurance
benefits of about $800 million.
The Houston-based company said it
cannot afford the ongoing and future costs of retirement benefits, including $60
million a year in post-retirement medical plan payments.
The company said
the court motions affect 4,000 salaried and 7,000 hourly retirees and their
dependents enrolled in company sponsored retiree medical benefit
The union said more than 20,000 retirees would be affected.
There was no explanation for the dissimilar figures.
No court date has
been set for hearing Kaiser's motions on the termination of its pension plans
and the rejection of its labor and retiree agreements.
'This is a
difficult but essential step in order for Kaiser to complete its restructuring
and emerge from Chapter 11 in mid-2004," Kaiser President and Chief Executive
Jack Hockema said. "Unfortunately, the exhaustive analysis we've done in support
of our business plan shows that the restructured Kaiser Aluminum will be unable
to fund and other post-retirement as they are presently offered."
Last month, the government's pension
insurance program said it would take control of a Kaiser retirement plan for
salaried workers that has 5,000 participants and is underfunded by $268
The latest- move apparently extends that to hourly
workers, a Steelworkers official said.
"Almost two years after filing
for Chapter 11 protection, Kaiser Aluminum is now forcing retirees - its most
vulnerable stakeholders - to shoulder the greatest burden in reorganizing the
company," said Steelworker District Director David Foster of
Yesterday's filing asks court approval for a distress
termination of the company's retirement benefits, turning over the plans to the
government's Pension Benefit Guaranty Corp.
The federal corporation
guarantees participants' vested pension benefits up to certain limits, typically
less than originally offered by companies.
The contracts cover
collective-bargaining agreements with unions such as the United Steelworkers of
America and the International Association of Machinists for plants in Trentwood
and Mead; Gramercy, La.; Newark, Ohio; Sherman, Texas; Tulsa, Okla.; and
Hockema and Kaiser will continue to discuss possible
compromises with the unions.
The motions address the defined benefit
pension plan, and no other changes are anticipated in labor contracts, Hockema
Kaiser filed for bankruptcy protection in 2002, and stopped
making payments to its pension plans in 2003.
Kaiser has a total of
25,000 retirees nationwide. Many live in the Spokane area, where Kaiser's two
largest plants used to employ more than 2,000 people.
employs about 300 Steelworkers at its Trentwood plant near here, where rolled
aluminum is made for the aerospace industry. Smelters at Mead and, Tacoma have
The PBGC was created in 1974 to ensure payment of basic
pension benefits for private sector workers. It is financed largely from
insurance premiums paid by companies that sponsor pension plans and by the
PBGC's investment returns.
In seeking bankruptcy protection in
February 2002 and January 2003, Kaiser blamed a weak economy, poor aluminum
prices, expensive electricity and legacy costs such as asbestos litigation and
pension plans. Kaiser is trying to sell some assets to settle creditor claims
and emerge from bankruptcy later this year.