Kaiser Aluminum & Chemical Corporation

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Kaiser Aluminum & Chemical Corporation

Kaiser Center
300 Lakeside Drive
Oakland, California 94643
(415) 271-3300
Fax: (415) 271-8930

Wholly Owned Subsidiary of MAXXAM Inc. through Kaiser Aluminum Corporation and MAXXAM Group Inc.
Incorporated: 1940 as Todd Shipbuilding Corporation
Employees: 10,661
Sales: $2.09 billion

Kaiser Aluminum & Chemical Corporation (KACC) was incorporated in December 1940 as Todd Shipbuilding Corporation. The firm changed its name to Permanente Metals Corporation in November 1941 and adopted its present name in November 1949. KACC mines bauxite, refines it into alumina, smelts alumina into aluminum, and manufactures a wide range of fabricated products that are sold primarily to the transportation, aerospace, and construction industries. The companys link with the latter two markets is not accidental. Henry J. Kaiser, the company founder, worked his way up through numerous business ventures, eventually establishing strong ties with both the construction and aerospace industries.

In 1895 Kaiser left school at age 13 to work in a dry-goods store. Three years later Kaiser marched into a Sprout Brook, New York, photography studio and told the owner he would triple the stores profits in two months. Offering one-day photo service, the young Kaiser fulfilled his promise to the proprietor and became a partner by his third month on the job. Kaiser later bought out the original owner and eventually operated three photographic studio and supply stores on the East Coast.

Kaiser moved west in 1906, working in the hardware business until 1914 when he formed his own road-construction company. By 1923 Kaiser had ventured into the sand and gravel business. Kaiser established headquarters in the late 1920s in Oakland, California, site of KACCs present corporate office.

During the 1930s Kaiser helped found Six Companies, Inc., a loose grouping of builders and earth movers that between 1931 and 1936 built Grand Coulee and Bonnneville dams on the Columbia River, and piers for the Bay Bridge between San Francisco and Oakland, California. Later the group started work on Boulder and Hoover dams. The unprecedented speed of the Hoover Dam constructiona project completed two years ahead of schedulewas Kaisers doing. His hurry led him into a tangle with U.S. Secretary of the Interior Harold Ickes. Six Companies was charged with violations of the eight-hour work-day law; the fines reached $350,000. In a public-relations blitz, Kaiser sent documents dramatizing the companys effort to complete the project to high government officials and congressmen. Not only did Kaisers tactic lead to a reduction of the fine to $100,000; more importantly, Kaiser became known to the government and public at large as a force to be reckoned with.

World War II prompted Six Companies to move into the shipbuilding, aircraft, steel, and magnesium industries. The Kaiser-led operation turned out 1,440 cargo ships and more than 50 aircraft carriers. The most significant of these ventures, which eventually led Kaiser into the aluminum business, was the 1940 formation of Todd Shipbuilding Corporation in northern California.

As early as year-end 1940, Kaiser and a colleague, Chad Calhoun, had barraged government officials in Washington, D.C., with proposals for an aluminum plant in the Northwest. From their experience in dam construction, the men knew that water was an inexpensive and abundant energy source available to power the plant. In May 1941 the U.S. government had granted an extensive contract involving more than 30 plants to the leading industry producer, the competitor Aluminum Company of America (Alcoa). Undaunted, Kaisers Permanente subsidiary stepped up magnesium production, to meet heavy war time demand. After the war, with an eye on rebuilding U.S. industry, Kaiser was convinced that private capital should take the place of government funds. Practicing what he preached, Kaiser announced his intentions to enter the aluminum industry. With a government surplus of 36 aluminum plants and Alcoa out of the running because of an antitrust injunction, the stage was set for Kaiser.

Another force that indirectly propelled Kaiser into aluminum was Kaiser-Frazer Corporation, an automobile-producing business that he formed with Joseph Frazer, in 1945. As a new firm, Kaiser-Frazer was nearly last in line for steel allotment. This situation prompted Kaiser to consider manufacturing aluminum automobiles. The idea was too advanced at the time, however, to be considered.

In 1946 Kaiser-Frazer and Kaiser Cargo, Inc., another Kaiser-controlled company, leased two government-owned aluminum plants in the state of Washington. The metals market had fallen off following the war, surplus aluminum abounded, and bauxite, the chief raw material needed to produce aluminum, was hard to find. Kaiser had advantages in his favor. Because of the postwar drop in production, Alcoa had discharged knowledgeable employees. Kaiser snapped up the available talent, as well as an idle Baton Rouge, Louisiana, aluminum smelter. Consumer demand for aluminum pots and pans and the international need for building materials gave the fledgling company a market to supply.

To be an autonomous aluminum producer Kaiser needed to obtain a steady source of bauxite. With Calhoun, Kaiser approached Alcoa. One short meeting later, a five-year contract was worked out. By late 1946 Permanente bought an empty aluminum plant in Tacoma, Washington. To ensure the capital necessary for expansion, Permanente went public in July 1948. Within a year the company acquired a German aluminum foil mill, which it moved piece by piece from Germany and rebuilt at the Permanente site; and a Newark, Ohio, wire, bar, and cable mill. With the latter purchase, Permanente was in the electrical-conductor business.

In November 1949 Permanente Metals became Kaiser Aluminum & Chemical Corporation, already the nations third-largest aluminum producer. Anticipating continued growth, KACC officials began scouting for additional bauxite deposits, which they located in Jamaica. The Kaiser Bauxite Company, a Bermuda mining operation, was organized in 1950 as a wholly owned subsidiary.

KACC had barely adjusted to a peacetime economy when the United States entered the Korean War. In response to the Federal Munitions Board order to increase aluminum production, KACC acquired a $115 million loan from the War Assets Administration and expanded operations. Chalmette, Louisiana, was chosen as the site for construction of the nations largest aluminum plant; it was the first ever to use gas as a power source. To integrate its aluminum manufacturing with aircraft production, KACC leased several war-surplus operations: an extrusion plant in Halethorpe, Maryland, in 1951; and a forgings plant in Erie, Pennsylvania, in 1954. The company bought the Erie plant outright within two years. Although the Korean War ended in 1952, the companys contacts with the government remained in place.

In March 1952, KACC signed a contract with the U.S. Air Force to design, build, and operate an aircraft-parts plant near the existing Halethorpe operation. Although the company ran into some snags at the Chalmette construction site, KACC did not slow down. By August 1954 the company announced plans to build a foil and sheet mill in Ravenswood, West Virginia. With the Ravenswood plant, Kaiser would not only be closer to the East Coast market; it would cut freight costs by two-thirds. The company was currently shipping bauxite from Louisiana to Washington state and from Washington to California to complete the production into aluminum. Kaisers product was traveling close to 8,000 miles before it ever reached a customer. When completed in the late 1950s, Kaisers Ravenswood plant would house one of the worlds largest aluminum smelters and mills.

By the mid-1950s the foil and automobile-parts markets opened up. KACC was the third-largest U.S. aluminum producer, right on the heels of Alcoa and Reynolds Aluminum. In the basic metals market, aluminum was second only to steel. In stride with expanded business options, in 1955 Henry J. Kaiser broke ground for the Kaiser Center, in Oakland, California. From Oaklands largest new office complex, Kaiser was controlling a $1 billion industrial complex, employing 41,000 people in 96 plants.

KACC research during the 1950s was fruitful, pushing the company into new ventures. At the Halethorpe plant, KACC engineers invented a device known as a plate-stretcher, designed to keep hot sheet-aluminum from buckling. Based on the Newark plants production of an all-aluminum electrical-conductor alloy, Kaiser moved into the electrical-power industry. In 1957 the company acquired a wire and cable plant in Bristol, Rhode Island, which produced a greater variety of conductors than any other plant in the United States. The same year a Kaiser chemist devised a method of manufacturing cryolite, a compound necessary to the aluminum-reduction process. Naturally occurring cryolite was found only in Greenland, and the synthetic product had been available only from European suppliers. After pilot projects, Kaiser built a successful cryolite-manufacturing plant in Mulberry, Florida, thus freeing itself from dependence on foreign suppliers. At a newly constructed alumina plant in Gramercy, Louisiana, Kaiser chemists produced chlorine in the aluminum reduction process. The company, therefore, moved into chlorine sales.

Other significant aluminum product developments were the production of an alloy used to manufacture automobile bumpers, and a malleable corrugated roofing material, both popular sellers. More importantly, Kaiser designed a two-piece aluminum can, an industry first, and copyrighted Kalcolor, an aluminum-coloring technique imparted by an electrochemical process during the production of the metal.

By 1955 after barely 15 years in business, KACC was budgeting more than $3 million for research in metallurgy, chemical products, and electrical products. The corporation was growing too quickly for Henry J. Kaiser to hand-pick candidates and promote them. On the advice of KACC president Donald Rhoades, KACC took on several development specialists to implement an internal promotion plan.

After the boom of the 1950s, Kaiser reorganized, decentralizing into five major divisions: products, metals, industrial, electric conductor, and international. Separate sales teams worked to keep the growing supply of aluminum and related products moving.

With increased competition causing a drop in aluminum prices, overseas expansion seemed the next logical step. The Kaiser International division was organized to investigate aluminum opportunities worldwide; by 1959 it had launched offices in Zürich, London, and Buenos Aires. By year-end 1960 KACC announced completed negotiations for the purchase and construction of plants in London, South America, Central America, and Spain. In all of these international acquisitions, KACC maintained partnership relations.

Two significant partnerships were established at this time. In 1960 Kaiser teamed up with Consolidated Zinc to form Commonwealth Aluminium Corporation, Ltd. Commonwealth Aluminium began construction on fully integrated aluminum production facilities in New Zealand and Australia, site of the worlds largest bauxite deposits. Kaiser also headed, with a 90% interest, the Volta Aluminium Company, Ltd., of Ghana. The massive project, which was first discussed in 1958, included construction of a port, a dam, a bauxite mine, an aluminum smelter, as well as transportation and housing facilities. By 1967, Voltas operations were in full swing and Kaiser had expanded, establishing aluminum fabricating plants in Canada; Europe, including Germany, France, Belgium, Switzerland, Norway, Turkey, and Sweden; and Thailand.

Thomas J. Ready, with KACC since 1946, was named president in 1963. On the domestic front, in 1965 Kaiser built a plant in Norco, Louisiana, to supply material for the aluminum reduction process, and a forgings plant in Oxnard, California. Through a separate division managing the manufacture and sales of highway products, KACC operated plants in Indiana, Florida, Washington, New York, California, and Utah. To manufacture its all-aluminum can, in 1968, KACC opened a plant in Union City, California. Immediate sales prompted construction of similar plants in Florida, New Jersey, and Texas.

To insulate Kaiser against the dramatic ups and downs of the aluminum market, Ready pushed to diversify. Kaisers chemical division expanded into fluorocarbons, used to manufacture aerosol products, and urethane foamed plastics. By 1966 the company had secured the nations largest aerosol account. Related acquisitions included the Standard Magnesium & Chemical Company of Oklahoma and Southern Nitrogen Company of Georgia. Through the Southern Nitrogen purchase, Kaiser moved into production and sales of agricultural chemicals such as fertilizer, pesticides, and cattle feed. KACCs 1967 purchase of Texada Mines, Ltd. further extended the companys holdings of phosphate deposits, iron, and other raw materials needed to keep Southern Nitrogen at the forefront in industrial chemicals.

When Henry J. Kaiser died in 1967, he left his son Edgar F. Kaiser as chairman of the board. At that time KACC controlled 196 plants in 34 states and 50 foreign countries. Employees numbered 90,000 while sales exceeded $2 billion.

With the formation of Kaiser Trading Company, in 1964, a wholly owned subsidiary, the firm entered the commodities business. Through a partnership with Aetna Life and Casualty Company KACC bought real estate in the United States, Australia, and Guam. Both ventures realized profits by 1970. Other new markets entered under Ready were in the nickel, shipping, and refractories industries.

Cornell C. Maier, an electrical engineer with KACC since 1949, succeeded Ready in 1972. Maier tackled pricing, always a thorn in the aluminum industrys side. As reported in Business Week, February 5, 1972, Maier set forth a price escalation policy designed to prevent further erosion of profits due to increasing costs. Before Maiers system, aluminum producers booked all orders for a given year at a fixed rate, regardless of price increases during that year.

Readys decision to diversify into agricultural and industrial chemicals panned out in 1974; non-aluminum sales accounted for nearly half the companys pretax profits. The combination of a drop in aluminum prices and a recession, however, caused Kaiser profits to dwindle quickly. Maier acted fast, unloading the nickel, shipping, and some chemical holdings, as well as some real estate.

With energy costs high and opportunities low in the United States, Kaiser once again looked to Europe for possibilities. Several partnerships, initiated in the early 1970s, resulted in the 1979 formation of Kaiser Aluminium Europe, a wholly owned subsidiary, and the construction of a new fabricating plant in Wales. Kaiser announced plans to build a new smelter in Queensland, Australia.

By the early 1980s aluminum industry prices hit record lows; soaring energy bills nearly doubled production costs. To combat the energy crunch, Kaiser invested in energy-saving heat-recovery equipment in its Louisiana plants, and modernized its Newark, Ohio, bar and cable plant. New projects were energy related. Kaiser invested $40 million in an oil exploration subsidiary, Kaiser Energy, Incorporated, and bought an aluminum-scraps reclamation plant in Indiana. Kaisers industrial-chemicals division bought Filtrol Corporation, a petroleum refining business, in the effort to move into specialized alumina.

During the early 1980s aluminum prices fell yet again. With a backlog of supply and no expected increase in the automobile-consuming public, no increase in the demand for aluminum could be expected. In 1982 A. Steven Hutchcraft Jr. was elected president, and Maier, then chairman of the board, wasted no time in responding to this downturn. KACC cut labor and production by 50% at the Mead, Washington, and Ravenswood, West Virginia, plants, and idled one-third of aluminum production in Louisiana.

By the mid-1980s KACC divested at every level: the company sold a 45% stake in Commonwealth; the refractories and fertilizer businesses; and Kaiser International, its trading firm. Blocking an attempted takeover, in first quarter 1987 KACC was reorganized as a subsidiary of KaiserTech Limited, a holding company. KaiserTech divestitures included Kaiser Aluminium Europe to Hoogovens, and Kaiser Energy to Presidio Oil. In October 1988 KaiserTech was acquired by MAXXAM Group Inc., a subsidiary of MAXXAM Inc. MAXXAM was considerably smaller than KaiserTech, and following the acquisition MAXXAMs sales shot up. In 1987 MAXXAMs sales had been $34.6 million, primarily on sales of lumber and related products and real estate development. In 1988 sales jumped to $519.2 million, and in 1989, with KaiserTech fully acquired, sales were $2.4 billion. Kaiser Aluminum & Chemical remained a subsidiary of KaiserTech Limited, the holding company. In 1990 KaiserTech Limited was renamed Kaiser Aluminum Corporation. In 1989 KACC acquired a controlling interest in Alumina Partners of Jamaica, while selling Filtrol Corporation.

Kaiser Aluminum & Chemical Corporation enters the 1990s a smaller and more tightly run operation. Concentrating its energies on what it knows best, KACC remains a fully integrated aluminum producer, operating 20 plants in 10 states and 5 foreign countries.

Principal Subsidiaries

Alpart Farms (Jamaica), Ltd.; Alpart Jamaica Inc.; Alumina Partners of Jamaica (50%); Anglesey Aluminium Limited (U.K.); Kaiser Alumina Australia Corporation; Kaiser Aluminium Europe (U.K.) Limited; Kaiser Aluminium International, Inc.; Kaiser Aluminum & Chemical International N.V. (Netherlands Antilles); Kaiser Aluminum & Chemical of Canada Limited; Kaiser Aluminum Properties, Inc.; Kaiser Aluminum Technical Services, Inc.; Kaiser Bauxite Company; Kaiser Center, Inc.; Kaiser Center Properties (50%); Kaiser Finance Corporation; Kaiser Jamaica Bauxite Company; Kaiser Jamaica Corporation (50%); Oxnard Forge Die Company Inc.; Queensland Alumina Limited (Australia); Strombus International Insurance Company, Ltd. (Bermuda); Trochus Insurance Company Limited (Bermuda); Volta Aluminum Company Limited (Ghana).

Further Reading

Lyons, Leonard, Unforgettable Henry J. Kaiser, The Readers Digest, April 1968; Stein, Mimi, A Special Difference, Oakland, California, Kaiser Aluminum & Chemical Corporation, 1980.

Frances E. Norton