Alcoa taking more time on modernization plan

MASSENA — Alcoa will not present the $600 million Massena East Plant modernization plan to the board of directors this year as once promised.

Project managers said Monday that taking the extra time to put together a proposal for a vote once market conditions improve may increase the project's chances of being approved.

When Alcoa signed an agreement in principle with the New York Power Authority in December 2007, the aluminum maker pledged to invest at least $600 million in upgrading the former Reynolds Metals facility.

It reaffirmed that commitment in January when a 30-year contract was signed. The contract guaranteed the company a 478-megawatt hydropower allocation in exchange for completing the modernization and retaining at least 900 jobs in Massena, a total that exceeded 1,200 at that time.

Project leaders had planned to prepare the modernization project for corporate board approval by the close of 2009 — a timeline that officials now suggest was extremely aggressive.

But the price of aluminum took an unprecedented 60 percent tumble between the fall of 2008 and early this year, and economic conditions deteriorated to the point where, on March 31, NYPA and Alcoa announced an agreement to suspend temporarily the requirements laid out in their contract.

Alcoa idled its Massena East smelter and relinquished, on a temporary basis, 237 megawatts of its hydropower allocation, while NYPA agreed not to enforce job retention requirements and the modernization project deadlines laid out in the agreement until conditions improved.

Layoffs went into effect in July, when 113 workers were furloughed. Alcoa and United Steelworkers Local 420 worked out a deal for 50 of those workers to be laid off in groups of 25 on an alternating monthly basis. Since the summer, the first 25 have gone on layoff for a month, then come back to work while the other group is laid off for a month.

Since the last of the potlines was shut down in July, Alcoa has maintained 250 employees at the East plant, and Alcoa's modernization crew has continued working to put together a project they believe their board will approve.

William R. Gerber, local coordinator on the project, said he cannot say yet when the project will go before corporate officials.

But he said he believes the extra time to consider a variety of options for the many components of the project will help the Massena crew prove to the board its plans are the most economical, viable solution.

"We were previously working very, very fast to meet all of those deadlines," he said. "With the deadlines suspended, we're still doing all of the same work, just at a much slower pace, now with the benefit of being able to dig into some of these issues."

One of the areas Mr. Gerber and his colleagues have been investigating is the way the company handles materials from facility to facility or department to department and what sort of cost- or time-saving measures they could take by redesigning certain sections of the East plant.

Another major discussion in the Alcoa offices here is what kind of a construction schedule would be most effective once the project is approved.

A shorter schedule could mean bringing on a larger number of additional workers and paying for things such as overtime and rush delivery on equipment, Mr. Gerber said.

Yet a more protracted construction plan could inflate costs such as equipment rental and other services.

Part of the goal of the modernization team will be to find the ideal balance to present to the board once economic conditions improve.

When that will happen is still largely unknown.

The market price for aluminum has increased from about $1,300 per metric ton at its lowest point early this year to about $1,800 per metric ton in recent weeks.

But global stockpiles of the metal are still extremely high, and global manufacturing of goods continues to lag.

Once things improve and the project is presented to the corporate board, Alcoa spokeswoman Laurie A. Marr said, the Massena project will be competing with capital projects and requests from plants all over the world.