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Alcoa Smelter to Remain Open by John Cook Seattle Post-Intelligencer - October 16, 2003

But company will cut capacity and jobs at Ferndale plant

Alcoa Inc., which had been expected to announce it was closing its Ferndale aluminum smelter because of high electrical rates in the Northwest, instead yesterday said it would reduce its output and cut 200 workers.

But the 37-year-old plant will stay open.

The news was greeted with mixed emotion by workers, labor leaders, business owners and politicians. They expressed happiness that the plant would remain open, but said the loss of jobs would harm the small community north of Bellingham.

The company's decision trims the plant's workforce by about a third and its capacity by half to 90,000 tons a year, Alcoa said in a statement.

"I think that's gonna hurt," said Eilene Perez, owner of Babe's Place in downtown Ferndale. "But I don't know; maybe eventually, they will be able to hire more and get it going again." She said about a third of the restaurant's customers work at the smelter.

Vicki Henley, who has worked at the plant for 16 years and now serves as chief shop steward for the International Association of Machinists and Aerospace Workers union, described the mood yesterday as "mixed."

"It has been so uncertain for so long that I think the people are mostly relieved to hear something," Henley said.

The Bonneville Power Administration, which sells electricity to Alcoa, is near an agreement to lower wholesale prices by an average of 10 percent, the federal agency said. Alcoa let its contract for Bonneville to supply the Ferndale smelter expire Sept. 30 because it expected rates to increase as much as 15 percent.

"Our aluminum customers have said it's difficult to operate at more than $32," per megawatt-hour, said Mike Hansen, a BPA spokesman. "With the settlement, we're well under their threshold. Given the state of the economy, a rate decrease will help a lot."

Sen. Maria Cantwell, D-Wash., a member of the Energy and Commerce Committee, has been working to lower energy rates at the smelter.

"We are hopeful that this setback is temporary and the plant will be able to run at full capacity in the near future," Cantwell said. "I want to get these hard-working men and women their jobs back."

If Bonneville's rate cut is approved by local utilities, the average price of electricity would drop to $30.16 a megawatt-hour, from $33.49 this year and would be retroactive to Oct. 1.

Alcoa said in July it would close the smelter and fire the 615 employees there if its rates weren't reduced. The company had already cut some jobs in anticipation of a shutdown. The most recent cuts are expected to occur by the end of the month.

Alcoa also is moving production from other costly plants in the United States to lower-cost smelters outside of the country. It has increased output in Quebec, where power is cheaper, and is building a plant in Iceland. Alcoa has about 127,000 employees.

State officials and utilities are reviewing the terms of the tentative agreement. The new rates need the approval of regional utilities, which could take as much as six months.

Pittsburgh-based Alcoa owns 61 percent of the Ferndale smelter; a Japanese consortium owns the rest.

Bonneville sells electricity from federal dams in the Northwest and is the second-largest federal power agency after the Tennessee Valley Authority.

Alcoa shares rose 3 cents to close at $30.76 yesterday on the New York Stock Exchange. Shares are up 35 percent so far this year.