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Home / Washington Business - May/June 2005 / Made in Washington - ALCOA: Back On Track |
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Made in Washington - ALCOA: Back On Track |
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Written On: May/June 2005 |
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Written By: by Daniel Brunell |
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Aluminum has been used since Greek and Roman times. Back then it wasn’t a metal, but a clothing dye. Even though aluminum is one of the world’s most abundant materials (about 8 percent of the earth’s crust), it was not used as a metal until the mid-19th century. This was due to the complex process of turning raw ore into the finished aluminum we know today.
World War II created a huge demand for aluminum. Almost all Allied planes were made from it, taking advantage of its strength, flexibility and light weight. Demand increased in the post-war period. By the 1950s, aluminum plants were popping up throughout the Northwest. Spurred by cheap electricity from dams on the Columbia and Snake rivers and an available, highly-skilled workforce, plants were built all over the Northwest.
The California energy crisis of 2001 coupled with an economic downturn suddenly made the industry no longer viable in the Northwest. Mills throughout the region started to shut down.
"In the Northwest, we used to have 11 aluminum mills running at full production," said Mike Rousseau, plant manager of ALCOA Intalco Works. "Now we are down to three mills running at partial capacity."
Little remains of a once-vibrant industry. Washington’s aluminum industry has lost more than 10,000 jobs since 1980. Plants from Longview to Tacoma dismantled their production lines. Others reduced capacity and hoped to ride it out. Two survived in Washington: ALCOA Wenatchee Works and ALCOA Intalco Works.
ALCOA is a world leader in aluminum production. With operations on six continents, ALCOA represents about 12.5 percent of the world’s aluminum refining capacity. Renowned as one of the most environmentally and socially responsible companies in the world, ALCOA was recently named by Fortune as one of America’s most admired companies.
Washington’s ALCOA mills are very different, but each faces the same problems to varying degrees.
Intalco Going Steady
Among cattle pastures and a cherry-tree-lined road near Ferndale, the Intalco plant comes almost as a surprise. Operating since 1966, this plant is one of the most modern aluminum mills in the Northwest. Currently employing more than 470 workers, the plant produces approximately 80,000 tons of aluminum per year.
As impressive as these numbers sound, they are nowhere near plant capacity. Employing up to 700 workers, this plant could produce more than 278,000 tons of aluminum per year.
In order to stay in business, Intaclo has been running at partial capacity for the last several years. "Rising electrical costs and rising labor costs in the form of health care have really hindered us," Rousseau said. "Aluminum is an international commodity. If we cannot put a product on the market at a competitive price, we go out of business."
Rising electric rates from the Bonneville Power Administration clobbered Intalco in 2001. Rates jumped to heretofore unseen levels. Before the crisis, the price of power from Bonneville was a bit lower then the national average. Since 2001, prices have fallen from all times highs, but remain almost 50 percent higher than the average paid by competing plants.
"We are trying to convince Bonneville to treat us like other industries in the Northwest, and to bring the price for all BPA customers down enough for us to open another line in 2006," Rousseau said. "In the meantime, we are looking for other ways to reduce our costs."
What Intalco has done is to start programs to reduce health care costs with safety initiatives. The results have been dramatic. "We are proud to be the safest mill of all of ALCOA’s North American operations," Rousseau said. "This is a testament to our employees and their commitment." Intalco also started an employee wellness program where individuals are rewarded for staying physically active and healthy.
These programs, however, can only do so much. As long as the price of power remains high, half of Intalco will remain dormant.
Wenatchee Returns to Work
On the banks of the Columbia, about 10 miles south of Wenatchee, is ALCOA Wenatchee Works, founded in 1952. A mammoth facility, the Works covers more than 70 acres and employed more than 560 people at its peak operation.
With the energy crisis of 2001, management decided to try something innovative. Wenatchee Works has a long-term agreement with the Chelan Public Utility District in which the mill receives 23 percent of the power generated by nearby Rocky Reach Dam at a negotiated price. The electricity from the dam was enough to power half of the operations at Wenatchee. The Works would have to buy the other half on the open market, mainly from the Bonneville Power Administration.
However, in 2001, the price of power became so expensive that the mill made more money selling its share of Rocky Reach electricity. With that, ALCOA decided to shut down the plant and use the profits from energy sales to build a new power plant so the entire aluminum plant could operate in the future. In 2001, ALCOA stopped making metal at Wenatchee works.
Wanting to keep its strong workforce together and not put people out of work, ALCOA did not lay off the more than 400 people then on its payroll. The down time was used for maintenance and retrofitting the mill. After this, ALCOA used the idle workforce to better the community. "Over the course of the shutdown, our Wenatchee workforce racked up more than 120,000 hours of community service," said Jack Spears, public affairs manager. "We did everything from cleaning up parks to installing solar power arrays at local schools."
When the electrical rates dropped to where the proposed power plant was no longer viable, Wenatchee Works restarted in late 2004. Relying exclusively on the power from Rocky Reach dam, the mill could only operate at half capacity. There were, however, other hurdles.
"The problem with only operating half of the mill is that we were staffed for a whole mill," said Bob Wilt, plant manager of ALCOA Wenatchee Works. To solve this Wenatchee Works went to their union, United Steelworkers of America. Both sides worked together and hammered out an agreement where the employees agreed to help lower labor costs and begin a slow, long-term reduction in the workforce through retirements and natural attrition. "We are very fortunate to have a good, pragmatic union and power utility," Wilt said. "Without them, we wouldn’t have restarted."
ALCOA Wenatchee Works reopened in November 2004. "It’s good to be back to work," Wilt said. "We feel that there is something really special going on out here."
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