October 29, 2002

Monthly Update to Customers, Employees, Suppliers, and Friends of Kaiser Aluminum:

The past month has been eventful, and we expect the balance of the year to bring more news about the steps we are taking to advance our Chapter 11 case and strengthen the company.  For example, in addition to the items summarized in this memo, look for details of an announcement within the week of a new family of 6061 extrusion products – evidence of our continuing efforts to anticipate and respond to the needs of the market.

Restructuring Update

The most noteworthy item at the regularly scheduled Bankruptcy Court hearing today was approval of Kaiser’s request to set January 31, 2003 as the general bar date by which certain entities must file proofs of claims in the company’s Chapter 11 case (except for asbestos personal injury claims).  Setting the general bar date is an important step in the reorganization process and reflects Kaiser’s progress in moving toward its goal of emerging from Chapter 11 as a strong and viable enterprise. We have issued a separate press release today to describe the bar date – and the claims process. We have also posted additional detail on our web site.

Separately, within the next several weeks, the company intends to ask the Court for an extension of the exclusivity period.  This is currently set to expire on December 12, and we intend to seek an extension of six months or so.  As a reminder, this is the period in which Kaiser has the exclusive right to propose a plan of reorganization.  As I have told you in previous monthly updates, we have good working relationships with the Unsecured Creditor's Committee and the Asbestos Committee, and I believe the company continues to make good progress in its Chapter 11 case.  Extensions of the exclusivity period are very routine in complex cases such as ours.

The next regularly scheduled Court hearing is set for November 26, 2002.

Sale of Non-Strategic Assets

You may have read recently about Kaiser’s efforts to sell non-strategic assets.  Specifically, the following transactions are in various stages of approval: 

• Brine line for sale proceeds of $3.0 million – this is an underground pipeline associated with the Gramercy facility that we haven’t used in years (this transaction was approved in today’s hearing);
• Oxnard aluminum forging plant for sale proceeds of $7.4 million – the plant’s product offering lies outside the targeted segments of the aerospace, transportation, and distribution markets on which Kaiser’s 11 other fabricating plants are focused; the company is working with the purchaser to ensure a smooth transition for existing customers; (pending court approval);
• Surplus assets – the company also has made a concerted effort to identify and sell surplus assets at a number of our locations. This is just good business sense: turning unneeded materials into cash. (ongoing activity with no requirement for court approval of individual transactions under $1 million provided the transactions otherwise fall within the terms of the court order approving miscellaneous asset sales).

National Association of Aluminum Dealers (NAAD) Annual Meeting

As a reminder, I am scheduled to make a presentation on November 14 at the NAAD annual meeting in Scottsdale, Arizona. My remarks will cover general industry topics and outline our vision of Kaiser’s strategic profile upon emergence from Chapter 11.  Kaiser will issue a press release summarizing my remarks – and we will do our best to see that all the readers of this memo also receive a copy of that press release.

Pension Plans: Long-Term Challenge Despite Strong Near-Term Liquidity

As many of you are aware, on October 23, Kaiser said it was exploring options to reduce or mitigate funding obligations for its pension plans. While it is not yet possible to say what actions will emerge from our analysis, this issue must be addressed in order for Kaiser to restructure and emerge as a financially sound company with strong prospects for the future. In that regard, we expect to schedule a meeting with the Pension Benefit Guaranty Corporation within the next month.  I want to emphasize that while we must deal with the pension funding issues, the company’s operating posture and liquidity are sound. As of September 30, 2002, Kaiser had just under $100 million of cash, no borrowings against our credit line, and only a relatively modest amount of letters of credit outstanding.

We understand that this kind of pension plan review creates uncertainty, and we are admittedly trying to maintain a fine balance as we work through these difficult issues. On one hand, the company must focus on taking all of the necessary steps to emerge from bankruptcy and remain viable long into the future, and that's what we are doing. On the other hand, we clearly need the talent and dedication of our employees to achieve that objective.  Although the current pension plans may be subject to change, we expect to provide suitable compensation and benefits to retain and motivate employees. 

Financial Results

Kaiser is planning to release financial results for the third quarter of 2002 on or about November 11. In addition, the next Monthly Operating Report (MOR) – for September – will be filed with the Court within the next several days.

Kaiser is working hard to maintain the ongoing commitment of our employees, customers, suppliers, and others – and I thank you for your support thus far. If you have any comments, questions or suggestions, please visit the website.

Jack A. Hockema
President and Chief Executive Officer

Monthly Operating Reports:
September 2002
August 2002
July 2002
June 2002
May 2002
April 2002
March 2002

Update Archive:
September, 23, 2002
August 27, 2002
July 17,2002
June 21, 2002