November 26, 2002

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

November included several important events and announcements, and a number of key messages bear repeating: we are sustaining forward momentum in our Chapter 11 case; we have defined our strategic vision and have been advised of a preliminary timeline for emergence from Chapter 11; and we are maintaining strong liquidity.

Keynote Speech at NAAD: Strategic Vision & Preliminary Timeline for Chapter 11 Emergence

My keynote address at the November 14 meeting of the National Association of Aluminum Distributors (NAAD) was summarized in a Kaiser press release that some of you might have seen. I was particularly pleased to receive very positive feedback regarding our message – and, more broadly, on the job Kaiser is doing to meet the needs of its customers.  The feedback was especially meaningful in this forum, which for many years has been a major annual event for aluminum distributors.

To recap the message:

  • We have developed a strategic vision for emergence from Chapter 11 as:
     
    • A standalone going-concern with manageable leverage, financial flexibility, improved cost structure, and competitive strength;
       
    • A company positioned to execute its long-standing vision of market leadership and growth in fabricated products, specifically with a financial structure that enables access to capital markets for accretive, complementary acquisitions;
       
    • A company that delivers a broad product offering and leadership in service and quality for its customers and distributors;
       
    • A company with a presence in key commodities markets that have the potential to generate significant cash at steady-state metal prices.
       
  • Our advisors have developed a preliminary timeline that could enable the company to emerge from Chapter 11 in 2004.  However, Kaiser’s management team continues to push very hard for an aggressive pace. 

New Product Development

On November 8, the company introduced the first product in the new Kaiser SelectTM product line. Kaiser Select is a family of engineered products featuring enhanced technical properties and competitive pricing for today’s demanding markets.  

The launch of Kaiser Select is another example of the way in which Kaiser employees have applied their expertise in advanced engineering, marketing, and manufacturing. It demonstrates our ability to listen to the “voice of the customer” and to collaborate to fill a need.   What’s more, it’s a manifestation of our continued funding of -- and commitment to -- strategic initiatives that enhance our competitive position in areas such as Lean Sigma, equipment technology, and alloy development. In this case, our team has created another milestone to sustain Kaiser’s posture as Best in Class in delivering customer satisfaction.

Restructuring Update

Today’s Court hearing covered a number of routine matters, the most notable of which was approval of the previously disclosed sale of the Oxnard aluminum forging plant for $7.4 million.

Separately, as I mentioned in my October letter, the company is preparing to file a motion that would extend the period of exclusivity, which is scheduled to expire on December 12, 2002.  The filing of the motion will automatically extend our exclusivity period until the next regularly scheduled hearing – which is set for December 19. Then, at the December hearing, we expect the Court to extend the exclusivity period through April 30, 2003.  Such extensions are routine in complex cases, and we believe the Court will grant our request.

Other Matters

  • Liquidity continues to be strong – despite the continuation of tough business conditions, the company has maintained liquidity of about a quarter of a billion dollars.  In addition, the company has negotiated with its lenders to gain even greater financial flexibility under its credit agreement (subject to Court approval on December 19).
     
  • Efforts to sell non-strategic assets are ongoing – on November 21, the company filed a motion regarding the sale of its interests in the Kaiser Center office complex (subject to Court approval in February 2003 and certain other conditions) for a cash purchase price of $65.6 million.  The proposed transaction will add to our already strong liquidity position.
  • No substantive news on pension plans – employees know that the company said on October 23 that it would seek discussions with the Pension Benefit Guaranty Corporation (PBGC) and union representatives to discuss alternative solutions to pension plan funding issues.   As of the date of this letter, the company has had separate initial meetings with the PBGC and the United Steelworkers of America – but thus far there have been no major decisions or changes affecting any of the company’s pension plans.
  • Quarterly CEO video on tap – by mid December, we will distribute to all major Kaiser locations our third and final video message of 2002. The tape will summarize the state of the company and is intended for viewing by all employees – as well as others who may be interested.  I trust you will have a chance to see the tape before year-end.

I thank you for your ongoing support and offer best wishes for a happy Thanksgiving with friends and loved ones.

Jack A. Hockema
President and Chief Executive Officer

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

Update Archive:
October 29, 2002
September, 23, 2002
August 27, 2002
July 17,2002
June 21, 2002