Aluminum Giant Seeks to Preserve Jobs Despite Production Cuts

In an innovative example of a private corporation and a public entity partnering to retain jobs during the economic downturn, the New York Power Authority (NYPA) and Alcoa (NYSE:AA), the N.Y.-based aluminum company, today announced they have reached an agreement that will save hundreds of jobs at Alcoa’s smelters in Massena, New York in the near-term and preserve hundreds more under its planned long-term modernization project at the plant.

Alcoa operates two smelters in Massena with a combined production output of 255,000 metric tons per year (mtpy). Due to the historic 60 percent decline in aluminum prices since last summer, Alcoa was considering curtailing operations at both Massena East and West smelters, which would have resulted in elimination of about 1,100 jobs. Recognizing the extraordinary economic circumstances, NYPA and Alcoa worked together to reach an agreement that will allow the West Plant to remain operational at its current employment level and to retain more than 250 of the approximately 420 East Plant employees during the temporary curtailment of approximately 120,000 mtpy at the plant which will begin in May. The more than 250 retained workers are essential to help prepare the East plant for its planned modernization, keeping the plant ready for re-start, performing maintenance and cleaning tasks. They will work on next phase activities for the modernization effort at the plant that should also help lower the overall costs for the project.

“The Power Authority recognizes the impact the economic downturn has had on many businesses across the state. It is critical to the economy and the future of Northern New York that we step in and work with Alcoa to avoid losing this community-anchoring company and largest private sector employer in the region with hundreds of high-paying manufacturing jobs,” said Richard M. Kessel, NYPA president and chief executive officer. “We understand Alcoa’s temporary business situation in the context of the global economy and that we were facing the possible loss of their operations, but now we are confident that the aluminum manufacturer will have a bright future in Massena."

“This is an excellent model of a government organization and private industry working together to help retain jobs and bridge the gap through these unprecedented times,” said John Thuestad, President of Alcoa US Primary Products. ”We both wanted to find a solution to keep jobs, address the current business situation, and enable the next phase of work on our Modernization Project to continue.

“This extraordinary effort by NYPA will save the Alcoa operations in the North Country, retain nearly 1,000 jobs in the region, and preserve the company’s future expansion plans,” Thuestad added.

The curtailment of approximately 120,000 mtpy in Massena brings the reduction of Alcoa’s total primary aluminum output to more than 850,000 mtpy, or approximately 20 percent of annualized output.

In order to enable the Massena East Modernization Project to continue to move forward, NYPA agreed to a more flexible schedule in light of the economic downturn. NYPA and Alcoa officials will meet on a regular basis to review business conditions and both are committed to establishing a project schedule that results in the modernization of the East Plant as soon as global aluminum market conditions recover.

The agreement includes:

  • Exchanging a portion of Alcoa’s “firm” hydropower allocation from the idled East Plant to the West Plant and transferring its “interruptible” hydropower allocation to the East Plant;
  • Waiving for two years the minimum charges related to its power allocations at the East Plant;
  • Temporarily lowering Alcoa’s job commitment threshold to 90 percent, which will conform with NYPA’s job commitment requirements of other industrial companies; and
  • Allowing Alcoa to make payments to the North Country Economic Development Fund as projects are approved instead of capitalizing the funds in full upfront.

“Although the decision to curtail and the necessity of some job reductions is difficult, these steps and particularly NYPA’s cooperation in working with us through these unprecedented times, are critical to the survival of the two Massena plants and they preserve the future of the Massena Modernization Project,” said Thuestad.

“Under Governor Paterson’s leadership, the Power Authority will continue to do everything within its power to support the upstate economy and to retain its most critical employers, especially as we weather this fiscal storm,” Kessel added.

Posted April 1st. 2009

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