Kaiser Aluminum Says New Labor Contract Enables Sweeping Productivity Improvement

Company to Record One-Time Charge for Settlement Costs

HOUSTON--(BUSINESS WIRE)--Sept. 18, 2000--Kaiser Aluminum & Chemical Corporation, the operating subsidiary of Kaiser Aluminum Corporation (NYSE:KLU - news), said today an arbitration panel has issued a decision on the remaining issues of a new labor contract. The new contract contains sweeping productivity improvement for five facilities that had been struck by the United Steelworkers of America (USWA) on September 30, 1998.

Thanking Kaiser's plant communities for their patience, support and understanding, Raymond J. Milchovich, president and chief executive officer of Kaiser Aluminum, formally acknowledged the end of the two-year labor dispute with the USWA and plans for returning a reduced workforce to the five facilities, which are located in Washington, Louisiana and Ohio.

``I am grateful this dispute is over, as I'm sure everyone is,'' said Milchovich. ``The gains from the new contract that resulted from negotiation and the arbitrator's decisions will ensure that these operations will remain competitive for years to come. Returning employees must realize that the best way to maintain long-term job security is by having plants that are efficient and competitive.''

The significant productivity gains in the new contract were largely established as the result of direct negotiations between the company and the USWA. The arbitration panel was empowered to establish contract terms on a handful of additional issues that the parties had been unable to resolve, including certain economic, job security, retiree insurance, and language items.

The new contract runs through September 30, 2005, calls for a 2.6% average annual increase in the overall wage and benefit package, and reduces the total number of hourly jobs at the five plants by at least 540, or approximately 19 percent, to about 2,260 from what had been about 2,800 on September 30, 1998.

In addition to the job reductions associated with productivity improvement, 148 jobs have been permanently eliminated in connection with the company's exit from the beverage can body stock business at the Trentwood, Wash., rolling mill. An additional 356 jobs are affected by previously announced curtailments at the Mead and Tacoma, Wash., smelters. In total, the company expects to recall hourly employees to fill approximately 1,756 jobs within 35 days from today.

Because of the improvements under the new labor contract, the company expects that total hourly payroll cost at the five plants at the end of the new contract period will be roughly equal to what it was on September 30, 1998.

The company said it expects its financial results for the third quarter of 2000 to reflect a one-time pre-tax charge of between $30 million and $40 million to reflect the incremental, non-recurring impacts of the labor settlement. The charge will be largely offset by a previously announced pre-tax net gain of approximately $40 million associated with the sale of electrical power.

``On balance, we believe this labor agreement is fair and reasonable for our employees -- and very good for Kaiser Aluminum,'' said Milchovich. ``At the outset of negotiations in 1998, our two main objectives were to provide economic improvement for employees who work in these plants and to offset that incremental cost with productivity gains. The new labor agreement provides improved economics for returning employees as well as an enhanced severance program for displaced employees; the agreement also achieves productivity gains that far surpass our original expectations.

``The reason we exceeded our original expectations is very simple,'' Milchovich said. ``During the past two years, as we operated without the artificial productivity barriers that had accumulated over the course of previous labor contracts, we gained a steadily increasing store of detailed, practical knowledge about the full potential of each of the plants. We then used that knowledge to bargain sweeping changes in contract language. The end result is exactly the kind of labor agreement these facilities need to remain competitive.''

The company's objectives and corresponding accomplishments associated with the new labor contract are highlighted below:

Objective: Improve the productivity of the five plants

Sweeping new language eliminates contract language barriers and results in reduction of at least 540 jobs
Significantly enhanced language enables the company to use contractors for surge work
Especially important for plant outages and turnarounds
Reduces downtime and cost, which increases productive capacity
Objective: Provide economic improvement for employees

2.6% average annual increase in overall wage and benefit package, including:
$2.30 per hour average wage increase over the life of the contract
$1.18 per hour of guaranteed wage base increase to replace plant-specific bonus plans
30% increase in pension benefit -- to a new average multiplier of $38.00
$10,000 per eligible employee through cash redemption of employee-owned preferred stock
``This was clearly a hard-fought labor dispute -- and, just as clearly, one we did not seek,'' said Milchovich. ``It was unfortunate for all of those who were forced to make sacrifices. However, at every significant step of the way over the past two years, management was presented with no reasonable alternative. When viewed in that context -- and in light of the labor contract that eventually resulted from this difficult process -- the investment in this effort was essential to our future.

``None of this would have been possible without the superlative work done by our management team and temporary workers,'' said Milchovich. ``Management employees, in particular, applied their technical and managerial skills with unwavering commitment while dealing with the many distractions that accompanied this labor dispute.

``We appreciate the unwavering commitment of our many customers, suppliers and contractors,'' he said. ``Many of them saw firsthand how we maintained consistently high standards of quality, delivery and operating performance.

``In addition, Kaiser offers thanks to the community at large, and various business, civic and political leaders who supported us. We believe these constituents recognized the inherent fairness and reasonableness of our objectives.

``We look forward to working with our returning employees in a cooperative environment that's largely free of the old barriers to productivity,'' he said. ``Successful implementation of this labor agreement will help us strengthen the company and help us meet the many challenges of the marketplace.''

Kaiser Aluminum is a leading producer of alumina, primary aluminum, and fabricated aluminum products. MAXXAM Inc. (AMEX:MXM - news) directly and indirectly holds approximately 63 percent of Kaiser.

Company press releases may contain statements that constitute ``forward-looking statements'' within the meaning of the Private Securities Litigation Reform Act of 1995. The company cautions that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those expressed or implied in the forward-looking statements as a result of various factors.

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Contact:

Kaiser Aluminum Corporation
Scott Lamb, 713/267-3826
or
Susan Ashe, 509/242-1066