MAXXAM's Kaiser Aluminum cancels pensions & benefits

Seattle Times Editorial:  The shame of Kaiser

On Jan. 12, Kaiser Aluminum & Chemical Corp. said it intends to cancel the
medical and pension benefits for all employees, union and nonunion, and
retirees. The pension benefits are federally insured, but the medical
benefits are not.

It is a sorry thing to end medical benefits to employees because the
business can no longer afford them. What is happening here is more than a
sorry thing; it is a shameful thing. Under cover of bankruptcy law, a
company is taking away benefits from its retired workers who already have
earned them and who have no chance to earn them again.

Only part of this has to do with the plight of the aluminum industry in the
Pacific Northwest. Because of the rise in power costs here and competition
in developing countries, our industry has become marginal at best. Of 10
plants, eight are closed, and none operates at capacity. But only two of
the closed plants are Kaiser's. Other owners dealt with the same problems,
and in generally better ways.

In 1987, Kaiser was bought by Texas capitalist Charles Hurwitz through his
company, MAXXAM. Hurwitz had had a fling in banking, had bought Simplicity
Pattern and had recently taken over Pacific Lumber, a family-owned
California company that had carefully husbanded its timber supply. Hurwitz
set out to pay for Pacific Lumber by doubling its cut of old-growth
redwoods. He bought the company with junk bonds and would do the same with
Kaiser, proposing to meet the bond payments by making Kaiser more efficient.

In 1998, Kaiser demanded a benefit cut. It was not the only aluminum
producer that did that, but it was the only one to lock out its workers for
20 months.

In 2000, came the power crisis. Kaiser, which had been sold a block of
public electricity at a below-market price for the purpose of maintaining
jobs, closed its smelter, threw its workers on state unemployment and sold
the power back to the government for a windfall gain of $468 million.

Meanwhile, a Kaiser pension plan was named in 1995 as one of the most
underfunded in America. Kaiser is now sticking the government insurance
fund with its pension liabilities, just as Hurwitz once stuck a different
government fund with the liabilities of a failed Texas savings-and-loan.

For years, this cavalier behavior has earned Hurwitz a stream of abuse from
the radical left, which has made him a poster boy for the rapacity,
shortsightedness and irresponsibility of American capitalism. We do not
agree with their generalizations about the whole system, but they were sure
right about him.