MIssoulian - Gov. Schweitzer to President Obama: Where Is the Protection for Montana Industries?

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MIssoulian - Gov. Schweitzer to President Obama: Where Is the Protection for Montana Industries?

By MATTHEW BROWN of the Associated Press

Gov. Brian Schweitzer is calling on the Obama administration to force General Motors to honor its contract with a Montana mining company instead of going overseas to buy the precious metals used to control vehicle pollution.

By failing to shield Stillwater Mining Co.'s platinum and palladium mines, Schweitzer said Friday that the administration had shown a bias against his state at a time when other U.S. jobs were protected with a "buy American" clause in the $787 billion stimulus act.

Details of the case paint a more complex picture: GM was effectively subsidizing production at the Montana mines, often paying above market prices for the metals. And since 2003, the mines have been majority-owned by a Russian company, Norilsk Nickel.

GM, which emerged from bankruptcy protection Friday, canceled its contract with Stillwater as part of a reorganization that will infuse the automaker with $50 billion in government loans. The loans are separate from the stimulus bill.

Stillwater executives said the decision means GM will have to import its supply of precious metals.

"When it comes to protecting the industries of the Midwest, it's buy American first," Schweitzer said. "When it comes to Montana, they say buy anywhere but Montana. What are we going to do if we have a mine strike in South Africa? Shut down the car industry?"

Platinum, palladium and a third metal produced by Stillwater, rhodium, are used to make catalytic converters that control pollution in car emissions.

The Columbus company employs more than 1,300 people and runs the only mines in the United States producing the metals. Its mines are about 90 miles southwest of Billings.

The company is heavily dependent on sales to GM and Ford Motor Co., although company representatives have declined to offer specifics.

With platinum and palladium mined in just two other countries, Russia and South Africa, Schweitzer said GM's cancellation would put the United States at a strategic risk and hurt the mining industry.

A White House spokesman declined immediate comment.

GM defended its decision to cancel the Stillwater contract, saying the deal had been "uncompetitive" and could have hobbled its efforts to repay the government loan.

"We will continue to make difficult decisions that best position the new GM for long-term viability," said GM spokesman Dan Flores. "There is an obligation to the taxpayers to provide a return on their investment to our company."

The contract set a floor price requiring GM at times to buy metals at prices above those on the open market. It also set production volumes, meaning GM had to keep buying a set amount from Stillwater even as its vehicle production fell from 9.2 million cars in 2006 to 8.4 million last year.

The Ford contract has similar terms.

At recent palladium market prices, the contracts had been shielding Stillwater from the equivalent of $57 million in lost annual sales, according to the company's filings with the Securities and Exchange Commission.

All the palladium produced by Stillwater's mines currently goes toward filling its automaker contracts.

The company employs 1,322 people at its two mines near Nye and a smelter and refinery in Columbus. Majority shareholder Norilsk Nickel controls 53 percent of Stillwater's stock.

Stillwater had been drafting a challenge to GM's contract cancellation in federal bankruptcy court. But with GM emerging from bankruptcy, it was unclear if that legal avenue remained open, said Stillwater spokesman John Beaudry.

"Our legal people are actively involved in our objection to the (GM) petition to void our contract," Beaudry said. "Stillwater Mining Co. very much appreciates the governor's support on this issue."

If the Obama administration does not intervene and Stillwater cannot pursue a restoration of its contract through GM's bankruptcy case, the company likely will have to file a claim for its losses and line up alongside the automaker's many other creditors.

It's not uncommon in such cases for creditors to walk away with pennies on every dollar owed.

Beyond its GM contract woes, Stillwater Mining has been hit by falling commodity prices that last year led it to shed 16 percent of its work force.

The company in May reported a first-quarter loss of $11.6 million, on revenue of $85.8 million. That's down from a 2008 first-quarter profit of $2.8 million, on revenue of $186.4 million.

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