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July 24, 2003
To: Kaiser Salaried Employees and Retirees
From: James McAuliffe
Vice President, Human Resources
Subj: Section 1114 Bankruptcy Court Filing Regarding Certain Retiree Benefits*
This is to advise you that Kaiser Aluminum today filed a motion with the U.S. Bankruptcy Court that begins the process by which certain retiree benefits ultimately will have to be modified or terminated as part of the reorganization.
We made this filing under Section 1114 of the Bankruptcy Code, which generally permits the modification or termination of certain retiree benefits if such action is necessary for reorganization and meets other requirements.
Today’s filing did not specifically request permission to modify or terminate such benefits. Rather, the filing asked the Court to approve the appointment of a committee of salaried retirees with whom the company can discuss the necessary changes. Separately, the company has begun to take steps to address hourly retiree benefit issues with appropriate union representatives. (I want to emphasize that Section 1114 has nothing to do with pension-related matters; the company continues to examine the pension issue separately.)
As you probably recall from Kaiser’s public statements when it filed for Chapter 11 in February 2002, retiree obligations are one of the significant factors that must be addressed in order for the company to emerge from bankruptcy. The total retiree benefit obligation (other than pensions) for hourly and salaried retirees and active employees is currently estimated to have a present value in excess of $700 million, and the company is currently spending almost $60 million per year on such benefits.
Kaiser understands that this is unwelcome news for employees and retirees and sincerely regrets any hardship or expense that you may experience as a result of these actions. However, the Company’s overriding objective is to do what is required, in this and in all other areas where changes must be made, to emerge from Chapter 11 and position the company for long-term success.
*The term “retiree benefits” in this memo is defined by Section 1114 of the U.S. Bankruptcy Code as certain non-pension benefits such as medical and life insurance.
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