The Paducah Sun

November 20, 1999

Officials fear layoffs to come in spring

By Joe Walker
Sun Business Editor

Union and elected officials fear that the U.S. Enrichment Corp. will lay off hundreds of workers at uranium enrichment plants in Paducah and Portsmouth, Ohio, as early as next spring and that upper management has no long-range plans for the company.

Their worries were supported earlier this week when a USEC lobbyist wrote the White House saying there will be "several hundred" layoffs at the plants because the firm is losing huge amounts of money as the agent for Russian uranium.

"It's plain to most people that this management team is bleeding this company, and in three years there's not going to be anything left," said Richard Miller, policy analyst for the atomic workers' union. "Internal predictions in the Department of Energy confirm that."

USEC leases the plants from DOE. Although USEC says no job decisions have been made, union officials and congressional aides indicate layoffs could be as high as 850. If the Paducah plant absorbed half that many cuts, it would have fewer than 1,200 workers, down more than 600 since USEC was privatized in July 1998.

USEC will decide by Dec. 1 whether to resign as agent for uranium taken from dismantled Russian nuclear warheads. It has asked for $200 million in federal money to offset the deal, which it says it costing millions of dollars because every unit of Russian uranium costs $8 more than USEC can produce it for. Also, the amount of uranium roughly equals the production of one of the plants.

Although the USEC board meets Wednesday, USEC spokeswoman Elizabeth Stuckle said it is uncertain whether a decision on the Russian deal or jobs will be made.

U.S. Reps. Ed Whitfield of Kentucky and Ted Strickland of Ohio, whose districts include the plants and thousands of workers, are worried about USEC's business outlook.

"We have many concerns about USEC," Whitfield said. "If the company is having financial problems severe enough to warrant help from the government, they would not be paying the high dividends (to stockholders) they have been paying since they went public."

Whitfield said he anticipates job cuts by next July, which is why he has been trying to get more environmental cleanup money to create jobs for displaced workers.

He and Strickland want an enforceable agreement between DOE and USEC that keeps plant employment the same through Dec. 31, 2004, except for early retirement, attrition or re-employment as DOE environmental workers. They also want enhanced severance packages for workers.

Among other things, the congressmen want to force USEC to reinvest 75 percent of its net cash flow to modernize the plants to be internationally competitive and stay eligible for any governmental relief for the Russian burden.

Strickland wrote Vice President Al Gore on Monday, saying he had "serious reservations about the wisdom of using public resources to assist a private corporation that initiates dividend payouts exceeding profits and stock buybacks of $100 million." He also said that an announcement of "significant layoffs" at the two plants was expected as early as March, regardless of government aid.

In a previously announced plan, the company eliminated about 250 jobs during the past year, and privatization law prohibits other layoffs before July 1. Stuckle said the firm has made no employment decisions beyond that date.

"We are doing a comprehensive review of all our costs, including staffing levels," she said, explaining that dropping prices for enriched uranium prompted the move.

Stuckle declined to respond directly to Miller's allegations of "bleeding" but stressed that after many years of debate, USEC was sold to the private sector for $3 billion "so it could make business decisions."

She said USEC is "acting in shareholders' interests" and its board of directors includes distinguished people with broad business experience.

Union and elected officials have criticized USEC for paying a stock dividend of 10 percent despite declining market prices and buying the Russian uranium. USEC is also trying to buy back $100 million of its shares to boost prices, which have dropped from $14.50 when it was privatized to about $9.

Miller's remarks followed a Nov. 12 memo in which Washington lawyer and USEC lobbyist Thomas Hale Boggs Jr. told the White House that the firm ''will be laying off several hundred'' employees. The Sun obtained a copy of the memo, sent to John Podesta, White House chief of staff.

Boggs said the reason is that USEC is paying higher than market prices for uranium from the former Soviet Union's dismantled nuclear arsenal. Stuckle confirmed that the corporation pays Russia about $88 per unit of enriched uranium.

"We can make it for about $80," she said. "So any businessman can look at that and say you're going to have to cut costs and realign that Russian cost to fair market value."

Stuckle said the Boggs memo "was part of ongoing negotiations" and could have been more carefully worded to suggest potential layoffs.

Many elected officials and bureaucrats, notably Energy Secretary Bill Richardson, are opposed to USEC's request for about $135 million in federal money to help with its costs of buying Russian uranium through 2001. Boggs' memo asked for White House support of that plan and another one to use $175 million of cleanup money that's in a DOE trust fund to hire laid-off production workers for plant cleanup.

The list of critics includes Rep. Tom Bliley, chairman of the House Committee on Commerce. Bliley wrote National Security Adviser Sandy Berger on Tuesday questioning whether USEC should have been privatized. The Sun obtained a copy of the letter.

"USEC's threat to resign as executive agent on Dec. 1, 1999, appears to have caught the administration off guard," Bliley wrote.

Although Boggs' memo said the governmental subsidy proposals needed action before Congress adjourns, Whitfield said they were presented too late in the term. Stuckle said discussions with congressional leaders continue, however.

David Fuller, president of the plant atomic workers' union local in Paducah, praised Whitfield for his efforts to protect the plant and said the union is working on agreements to give displaced production workers first choice of environmental jobs.

"This last figure of 850 layoffs is just terrible news, even though it's not altogether unexpected," Fuller said. "We hope to mitigate as many layoffs as we can, but the reality is that we're not in a position to deal with hundreds of workers. There are just not that many cleanup jobs available."