BRASS TACKS: Olin Workers Asking Questions About Company’s Future

By Nick Lucchesi, The Telegraph, Alton, Ill.

Oct. 21–EAST ALTON — Carrying his lunch cooler and donning blue jeans, a T-shirt and baseball cap, Bert Hartley wears the unofficial uniform of the Olin Corp. metals unit employee.

An electrician at Olin, he commutes each day from Jerseyville to the East Alton brass manufacturing operations, part of a routine he has kept for 34 years.

But now Hartley, like most who work in Olin’s recently sold metals division, is worried.

“It ain’t good, it ain’t good,” he said while walking to his pickup truck one afternoon last week at shift change. “A lot of people are going to lose their jobs.

“Nobody knows what’s going on; it’s all questions. We don’t have any details or anything. Nobody knows nothing; they’re not saying really nothing.”

On Monday, Olin announced the sale of its metals business to New York-based private equity firm KPS Capital Partners LP. The sale was finalized the previous day on Oct. 13. An afternoon meeting with union officials and management took place on Monday afternoon, and soon after, employees found out.

The Olin metals business employs about 2,900 people, and 1,800 of them work at the East Alton facilities. What remains to be seen is whether any of them will lose their jobs.

Metals have been a part of Olin’s business since 1916, and workers feel much is at stake. KPS has a history of buying under-performing companies, restructuring them and selling them off.

“It’s just spooky. We don’t know what’s going to happen,” said a 20-year employee and member of the Pipefitters Local 553 in Wood River, who did not want to be named.

“(The buyout) is all we talk about,” said a fellow co-worker with 16 years’ experience. “That’s the shop talk, the lunchtime talk, and it is a very great subject of concern to all of us employees.”

Union representatives for the nine different unions in the metals division say current contracts will be honored.

Dennis Pearson, business representative for the International Association of Machinists and Aerospace Workers District 9 in East Alton, said the 900 to 1,000 Machinists in East Alton’s metals division are promised their jobs until the current contract expires in December 2008.

After the Machinists’ contract expires, Pearson said the agreement is bound to change.

“There will have to be some type of change, because Olin’s pension is a company-specific plan,” Pearson said, but he noted that existing pensions for employees would remain in place.

The sale to KPS came as a surprise to many Olin workers but was not unexpected by analysts. Olin Corp. officials had been ramping down their metals manufacturing output and closing facilities in recent years. In 2003, Olin announced it was closing its Indianapolis metals plant because of less demand for the product.

Olin CEO Joseph Rupp also commented to stock analysts as early as October 2005 that the corporation was considering closing or selling the East Alton facilities because of sagging profits.

Earlier this summer, Olin hired Goldman, Sachs and Co. to find a buyer for the metals business.

Asked by one analyst last week if KPS could run metals better than Olin, Rupp said KPS has previously had successful acquisitions in the metals business and “feels comfortable operating in the environment.”

Olin has increasingly zeroed in on its chemicals manufacturing sector, which culminated in the purchase of Pioneer Companies for $413 million in May. Olin added “roughly 1000 employees” on Aug. 31 with the Pioneer buy and proceeds from the metals sale will be used to reduce the debt in the purchase, Rupp said.

Olin’s Winchester ammunition division, also based in East Alton, has performed well and the company said it intends to keep it, although analysts seemed somewhat skeptical last week. Asked by one of them if he thought Olin could be successful as a “pure chor alkali business,” Rupp said yes.

The financial future for management at Olin’s metals unit in East Alton and at other sites across the globe remains unclear, according to corporation executives.

In a conference call last week with stock analysts, Chief Financial Officer John Fischer said the future plans for $40 million to $45 million in annual corporate expenses would be answered soon, during a third-quarter conference call.

Much is unknown about the future of Olin’s manufacturing plant, but employees there who have researched KPS are concerned that the company will divide up the metals division and sell it off in individual chunks in a few years.

KPS affiliates, such as Global Brass and Copper Holdings Inc., the company that is buying Olin metals, have histories of buying and selling industrial companies, primarily in the metals business.

Olin workers call the developments, at the very least, bothersome.

“There’s no information being given out,” said Rick Siemer, a member of the Carpenters Union Local 377 of Wood River. “It’s the unknown, not having the peace of mind or anything. It’s kind of bothersome.”

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Copyright (c) 2007, The Telegraph, Alton, Ill.

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