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CFAC: Changing of the guard

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CFAC: Changing of the guard
CFAC: Changing of the guard

CFAC plant manager says time is right to resign, hand over control

COLUMBIA FALLS - When Larry Tate took the helm of the Columbia Falls Aluminum Co., the plant was in turmoil.

There were lawsuits and labor troubles, and CFAC's production was considerably curtailed.

Five years later, as Tate prepares to retire, his plant is again in turmoil, with skyrocketing electricity prices forcing, yet again, cutbacks in production.

"There is no good time for a management shift," CFAC's vice president and general manager said. "The waters are never perfectly calm, and there is no good time. The plant has its problems from day to day; there will always be issues."

Which makes it as good a time as any for the 56-year-old to give up his seat and call it a day.

Tate, who had held his post since he "retired" from 30 years with Alcoa, said his pending departure has nothing to do with recent struggles over electricity costs. CFAC uses a tremendous amount of energy - perhaps 20 percent of the total used in Montana - and high power costs forced the Sept. 30 shutdown of one-fifth of CFAC's production line.

"In this industry," said Steve Knight, "there's just no point in time when everything's nice and glorious."

Compared to the last few years, however, Knight admits that "the waters are pretty smooth right now."

And that should make it easier for Knight to step from his position as smelting manager into Tate's general manager shoes.

"Pretty smooth" is obviously a relative term, however, as plant managers are facing a series of good news-bad news scenarios.

The bad news: Currently, they are trying to figure out a way to cut 83 jobs from the plant work force of about 600. That's the latest estimate, Tate said, based on CFAC's projection of running at just 80 percent capacity for the next couple of years.

The layoffs, scheduled for the first of the year, will slash payroll by more than $4 million, and so will send ripples throughout the small local economy.

The good news: CFAC just signed a five-year contract with the Bonneville Power Administration, locking in relatively cheap federal power for 50 percent of the plant's needs.

The contract offers electricity at $23.50 per megawatt hour, plus a couple of dollars in transmission costs. Although that is well below the $40 or so charged in a recently deregulated market, it is bound to go up; the contract sets only a base price, with provisions for increases through 2006.

But Tate is encouraged by the fact that these waves, at least, can be weathered by the entire plant. Workers can rally against a common enemy - power prices - and find common ground in their shared plight.

The waves rocking CFAC when Tate arrived in 1995, on the other hand, threatened to pull the ship apart through factional disputes between owners and employees.

That trouble began back in the 1980s, when CFAC was foundering in low aluminum prices and high energy costs. The combination threatened to close the plant forever.

At the last minute, Brack Duker bought CFAC for a token $1, plus $3 million for the inventory. With the help of federal and state politicians, he negotiated cheaper power, cut costs at the plant, and turned CFAC around.

One tool Duker used was to cut employee wages and benefits, with the promise that when CFAC was again in the black workers would share his profits in a 50-50 split. Sure enough, in the early and profitable years both hourly and salary employees enjoyed big bonus checks representing their share of the profits.

Later, those checks dwindled and finally stopped coming altogether. One of the plant's accountants smelled something fishy and filed suit; both hourly and salary employees eventually joined that litigious battle, pitting workers against owners and management.

Emotions reached a fever pitch in 1995 - not long after Tate arrived - when news was leaked that one of CFAC's suppliers was cutting off business with the plant, saying owner Duker had been hiding profits in offshore accounts.

That revelation came just as hourly workers were sitting down to negotiate a new labor contract. Those talks grew increasingly bitter, finally stalling with talk of a strike.

Owners responded with black-booted security patrolling the parking lot and plant with video cameras, training their watchful eyes on employees.

Finally, Montana's governor and congressmen stepped in at the 11th hour, helping to hammer out a compromise contract that left no one happy but avoided a total plant shutdown.

At the same time, employees were enduring the throes of bringing the plant up to full steam after years of running at partial capacity. The added workload, when combined with the contract talks, had many employees grumbling.

Meanwhile, the lawsuit against the owners smoldered in the background, with workers claiming they had been shortchanged to the tune of more than $150 million.

A few years later, the night before the trial was to begin, workers accepted a settlement for about two-thirds of what they felt they were owed.

The harsh feelings behind the suit, however, lingered until last year when Duker sold the plant and washed his hands of the struggle.

Through all of the turmoil, Larry Tate kept his head down, kept focused on the job of making aluminum, and somehow kept his ship from sinking. He had inherited a maelstrom, and it was his job to make metal amid the storm.

"There were a lot of things going on, there's no two ways about that," Tate said. "I held it together by trying to focus on things inside the fence, the things here in the plant that we had some control over."

He ignored the courtroom maneuvers, pushing instead priorities such as workplace safety, environmental responsibility, increased productivity, and cost-cutting wherever possible.

"Everything needed to revolve around those four issues in some form or another," he said. "But it's tough when you've got a lawsuit going on with employees suing the owner … lawyers fuming around. I just tried to keep myself out of all that. You can get tangled up in that kind of thing and lose your effectiveness pretty fast."

As the centrifugal whirlwind of change and animosity threatened to pull the plant apart, Tate held things together simply by going about the business of smelting aluminum.

When that storm was finally long gone and new owners were running the show, Tate thought he had time to relax.

"The outside distractions," he said, "are a dull roar compared to what they've been."

But then came the power problem.

At the heart of the electricity issue is supply and demand - not nearly enough of the first and too much of the second. Place that scenario in the recently deregulated market and private companies are quick to capitalize with higher and higher prices.

CFAC itself was a strong backer of deregulation and left BPA to purchase a small portion of needed power on the open market. That was back when the private market sold juice for as little as $16 per megawatt hour.

Then came the summer of 2000, heat waves in California, low water behind Columbia River system dams, unexpected breakdowns at big power plants, cutbacks in the amount of cheap federal power, more people in the region, more pull on the system.

Spot prices for electricity jumped from $16 per megawatt hour to more than $1,000 per megawatt hour. Aluminum plants and other industrial operations throughout the region closed up shop.

CFAC held on, but faced an uncertain future in which half the plant's power needs would have to be met by this volatile private market.

Rather than run as long as possible at full steam and then crash back to half speed, Tate and others decided to cruise at a steady four-fifths speed until January 2002. After that date, CFAC's planning chart looks like an ancient map of the world, with great white blank spaces of terra incognita.

For the fourth fiscal quarter of 2000, Tate was able to keep everyone on the job despite the 20 percent cut in production. Workers usually busy making metal are instead tinkering on the plant to make CFAC more energy-efficient. Others are filling in to help cut overtime costs.

But as of Jan. 1, 83 hourly employees have to go. Some will retire with an incentive package in their pockets. Some will leave for other opportunities and their posts will not be filled. Others, the lowest on the seniority ladder, will be sent home involuntarily.

"One way or another," Tate said, "83 people will be gone."

Salaried employees do not yet face layoffs, although anyone on their way out will likely not be replaced. When Knight steps in for Tate, for instance, no one will step in for Knight.

Local contractors such as engineers and designers also will feel the pinch, as CFAC turns to in-house expertise while tightening its belt.

The cutbacks should help buy time, Tate said, until the market turns around or until January 2002. At that time, the plant will be a year into its five-year contract with BPA, but will need to nail down the remaining 50 percent of its power needs on the open market.

If the market is still unbearable, the plant could pull back from 80 percent production to 50 percent. How that future might play out, however, is far from known - after all, Tate said, it was just a couple of years ago that the private market offered the cheapest power around.

Anything could happen. But one thing is certain.

"The reality is that without finding other competitive-priced power, the only power we have is the BPA load, and that only covers half our need," he said. "Yes, it's possible we could be at 2 1/2 potlines (50 percent capacity) on down the road."

Said Knight: "What it's going to take is for us to just buckle down and ride out the storm."

Tate, meanwhile, plans on avoiding the storm altogether. He'll retire to his home in Whitefish, he said, but will "do some fast-tracking south in the winter."

The last time he retired, he said, it only lasted a couple months. This time, he plans on trying it on for a bit longer, just to see if it fits.

"Like I said, there's really no good time to step down as far as plant issues are concerned. But I have reached that point where I think it's right for me. It's been a bumpy ride with lots of up and down, and now it's time to go."

Reporter Michael Jamison can be reached at 1-800-366-7186 or at mjamison@missoulian.com.

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