Sep 17 2008

Alcoa in Texas Lawsuit, Workers Laid Off

Alcoa's Rockdale smelterAlcoa has laid off 300 workers in it’s Rockdale smelting facilities in Texas after idling some of the facility. Another 100 contract workers will be affected. The aluminium giant says this is necessary due to unreliable power supply from the energy supplier that is contracted for the smelter, Luminant. That company claims Alcoa is using them as an excuse to fire workers to drive up profitability.

“There have been ongoing supply issues at the dedicated power generating unit adjacent to our plant, which has forced us to go into the open market to secure power,” said John Thuestad, President of Alcoa’s US Primary Metals division. “Unfortunately local energy costs have escalated significantly over the past few weeks to an unsustainable level and we have no choice but to idle production that is reliant on uncompetitive power.”

Alcoa has taken Luminant, owned by KKR, Texas Pacific Group, and Goldman-Sachs through Energy Future Holdings, to court for spikes in Energy prices. Alcoa has claimed that Luminant is out to get rid of Alcoa in Texas.

Alcoa said in a copy of the lawsuit:

It appears that the Luminant family’s true goal may be to cause Alcoa’s Rockdale smelter to shut down completely and forever,’

Luminant stated, in response to Alcoa’s allegations:

We believe Alcoa has a history of using layoffs to manage costs and drive their own profitability. This is simply another example. Alcoa has made independent business decisions that have apparently now resulted in layoffs.

For the past two months, Luminant has offered Alcoa additional price protections along with a stable, predictable and economically viable power supply. Alcoa has refused, taking an inflexible stance, seeking power at unrealistically advantageous terms and demanding a price far below the prevailing commercial market price.

Luminant is supplying prices far below the martet price, as Alcoa signed up for “first drop” pricing, which means that if the grid gets overloaded, Alcoa’s smelting plant is the first to go be cut off. In that case Alcoa needs to find (highly expensive) short term supply on the market to prevent going off-line. In other words, Alcoa is suing EFH/Luminant for providing exactly the service they had contracted to provide.

It appears that Alcoa is using the power company as a scapegoat to close down a facility that has become less profitable. The 250 laid off workers and the local community pay the real price.

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