Kaiser Aluminum Aims to Ax Benefit Plans

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Kaiser Aluminum Aims to Ax Benefit Plans

By John K. Wiley, the Associated Press

January 12, 2004

Kaiser Aluminum Corp. asked a federal bankruptcy court Monday for relief from obligations to pay medical and life insurance for thousands of retirees and dependents and to end its underfunded pension plans.
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.
“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 A. Hockema said in a release. “Unfortunately, the exhaustive analysis we've done in support of our business plan shows that the restructured Kaiser Aluminum will be unable to fund pension and other post-retirement benefits as they are presently offered.”

The United Steelworkers of America -which represents employees at seven Kaiser facilities in the United States and Canada -immediately criticized the move, estimating its retirees would lose health insurance benefits of about $800 million.

“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,” Steelworker District Director David Foster of Minneapolis said.

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 programs. The union said more than 20,000 retirees would be affected. There was no immediate explanation for the dissimilar figures.

The motions come a month after 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 million.
The latest move apparently seeks to extend that to hourly workers, a Steelworkers official said.

Monday'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, Wash.; Gramercy, La.; Newark, Ohio; Sherman, Texas; Tulsa, Okla.; and Richmond. Va.
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 said.

Kaiser filed for bankruptcy protection in 2002, and stopped making payments to its pension plans in 2003. It is trying to sell some assets to settle creditor claims and emerge from bankruptcy later this year.
Kaiser has a total of 25,000 retirees around the country.