How the Former Kaiser Companies Have Fared : Cement: Fighting a Battle to Stem the Increasing Flood of Low-Cost Imports
From the window of his 24th-floor office at the Kaiser Center, Walter E. Ousterman can see downtown Oakland settling into middle-age spread and, in the distance, the pastel blush of San Francisco. In the buildings and in the highways and bridges that lace the cities together, he can see Kaiser cement.
But Ousterman, the 55-year-old chairman, president and chief executive of Kaiser Cement Corp., knows that more and more construction, especially in the burgeoning cities of Southern California, is being done with cheaper imported cement. And he waits for the next decision in the costly and frustrating case against the foreign competition.
“Our Commerce Department likes to tell everybody that all you have to do is use the laws of the United States if you’re being injured” by imports, Ousterman said in an interview. “Unfortunately, it’s very expensive, it’s very time-consuming and it doesn’t work.”
The U.S. International Trade Commission determined that foreign cement makers, including Japan and Australia, “dumped” cement--that is, sold it in this country at prices below those charged in their own markets. But it ruled that the U.S. makers, including Kaiser Cement, were not harmed by the dumping. The cement makers group has appealed, and still hopes duties will be imposed to help even out the prices.
Orders Setting Records
Industrywide, new orders for cement have been setting records, but with prices still depressed, the profits are more difficult to come by. Kaiser Cement has been reducing its costs even as its shipments increase. An expansion and modernization program begun in the late 1970s gave Kaiser Cement what analysts say is the best plant system in the industry. But others also modernized and now the industry is knee-deep in inventory while prices are low.
“The cement happens to sell for about 2 1/2 cents a pound,” Ousterman said. “I don’t think if you sat there for 10 minutes you could think of another product that was that cheap.”
Even at that price--about $50 a ton--Kaiser is undersold by the foreign cement makers. In their home markets, he said, the foreign makers sell cement for $55 to $60 ton, but in the United States they charge $29 a ton.
Profits at Kaiser Cement peaked at $50.1 million in 1978, helped by the sale of its gypsum division. By 1983, the company was in the red, and its 1984 loss was $52.5 million, mostly the result of writing off its troubled Hong Kong joint venture.
Analysts warily note that those losses came during a time of steady recovery in the primary markets for cement, including housing and general construction. Kaiser and other cement companies face even tougher times as the economic recovery slows.
Seen as Challenge
Ousterman sees it as a challenge. “I think the rest of the (economic) cycle is going to be difficult,” he said. “It will require all of our ingenuity to get the most out of our modernized plants. We think that that will carry us through . . . the next trough.”
Analysts agree that problems in the industry generally are out of the producers’ control. Kaiser, they say, has been a well-managed company, and call its current strategy of selling off assets and lowering debt sensible.
Kaiser recently sold its Hawaiian plant conceived by founder Henry J. Kaiser, and, Ousterman said, “There will be additional sales of assets that really aren’t central to our business, taking place probably over the next year. After the loss of Hong Kong and the damage it did to our balance sheet, we would like to be able to improve our balance sheet in terms of less debt.”
KAISER CEMENT AT A GLANCE
Year ended Dec. 31 (in Millions): 1984 1983 1982 Revenue $249.3 $215.7 $213.4 Net income (loss) (52.5) (5.2) 18.3
Includes $59-million loss on China Cement
