Alcoa takes decisive action to counter economic downturn
January 8, 2009 By Alcoa
Alcoa takes decisive action
to counter economic downturn
Alcoa has announced that it is countering the economic downturn with a series of specific actions to conserve cash, reduce costs and strengthen the company’s competitiveness.
Alcoa has announced that it is countering the economic downturn with a series of specific actions to conserve cash, reduce costs and strengthen the company’s competitiveness. The parent company of Kawneer Canada, Alcoa says it is building on its previous commitments and these actions address additional production curtailments, cost and procurement efficiencies, portfolio streamlining and reduction of capital expenditures and other liquidity enhancements.
“These are extraordinary times, requiring speed and decisiveness to address the current economic downturn, and flexibility and foresight to be prepared for future uncertainties in our markets,” says Klaus Kleinfeld, president and CEO of Alcoa Inc. “We are taking a wide-ranging set of aggressive, but prudent, measures to ensure that Alcoa maintains its competitive lead in today’s challenging markets while also emerging even stronger when the economy recovers.”
Targeted reductions, curtailments, plant closures and consolidations will cut more than 13,500 employees or 13 per cent of the company’s worldwide workforce by the end of 2009. An additional 1,700 contractor positions also will be eliminated. The Company has also instituted a global salary and hiring freeze.
The company is stopping all non-critical capital investment to conserve cash. Capital expenditures in 2009 are projected to be down to 1.8 billion dolllars, a 50 per cent decrease from 2008, and will be 1.5 billion dollars after partner contributions.
Total charges for the 4th quarter 2008 due to restructuring, impairment and other special charges are expected to be between 900 and 950 million dollars after tax, or 1.13 dollars to 1.19 dollars per share, of which approximately 80 per cent is non-cash. The restructuring and divestiture program is expected to save approximately 450 million dollars before taxes on an annualized basis.
Further smelting reductions of 135,000 metric tons per year (mtpy) will be implemented resulting in reduction of total primary aluminum output by more than 750,000 mtpy, or 18 per cent of annualized output. Alumina production will also be reduced accordingly across the global refining system to a total of 1.5 million mtpy in response to market conditions. Cost reductions across the global primary metals and alumina operations, including those associated with curtailments, affecting approximately 2,600 employee and contractor positions.
To help further reduce Alcoa’s cost position, the Company finalized new power agreements in Quebec through 2040. The agreements will supply clean, renewable energy to all three of the company’s aluminum smelters in the province – Baie Comeau, Becancour (ABI), and Deschambault — and enable Alcoa to upgrade and expand Baie Comeau production. The agreements cover approximately 1.1 million mtpy, or more than 25 per cent of the company’s production.
“Because we recently completed an extensive competitive analysis, including a strategic review of each business, we have been able to quickly identify and implement effective responses that strengthen our market competitiveness and financial staying power in the economic downturn. We will continue to monitor the dynamic market situation to ensure that we adjust capacity to meet any future changes in demand and seize new opportunities that emerge. These are extraordinary times requiring extraordinary actions,” says Kleinfeld.
See the full press release: http://www.alcoa.com/global/en/news/news_detail.asp?pageID=20090106006407en&newsYear=2009
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