Alcoa plans to pare its downstream operations in a series of moves it calls a “targeted restructuring.” In all, the aluminum giant says it expects the changes will improve corporate profitability by repositioning several business units in order to increase returns. The company will eliminate approximately 6,700 positions worldwide through these changes.
The restructuring will include plant closings and consolidations and is expected to save approximately $125 million before taxes on an annualized basis.
The most notable move will be setting up a joint venture with Orkla ASA, the parent of aluminum extrusion chain Sapa Group, which will assume control of Alcoa's soft-alloy extrusion operations. Sapa will have the majority stake in this venture, which is expected to be spun off as an independent company by the end of Q1 2007.
Additionally, Alcoa plans to sell off three soft-alloy extrusion plants not included in the joint-venture plan. These are in Warren, OH, Tifton, GA, and Plant City, FL.
“After reviewing a number of options, we have decided the best course to further strengthen our downstream operations and maximize shareowner returns is to combine the soft-alloy operations of these two businesses,” said Alcoa Chairman and CEO Alain Belda. “The combination of these two operations provides many opportunities to improve profitability by leveraging the scale of a broader global manufacturing system.”
Alcoa plans to remain in the hard-alloy extrusion business, but it will eliminate approximately 370 positions in those operations, in the U.S. and Europe, through “optimization” efforts.
Belda went on to indicate the performance and potential of other downstream operations, noting particularly that “Alcoa Howmet and Alcoa Fastening Systems have improved profitability by more than 60% the past year. And,” he explained, “our forgings, global building, and construction and hard alloy extrusion businesses are solid performers.”
During the fourth quarter of this year, Alcoa's restructuring will include:
- Reorganizing Alcoa's can-sheet operations, eliminating 320 positions, and closing a plant in Swansea, Wales.
- Restructuring and consolidating Alcoa's automotive and light-vehicle wire harness and component operations, including closing the manufacturing operations of the AFL Seixal plant in Portugal and restructuring the AFL light vehicle and component operations in the U.S. and Mexico. This will affect over 4,800 positions.
- Consolidating some operations in Alcoa's global packaging plants, eliminating approximately 470 positions.
- Downsizing Alcoa's global primary metals and alumina operations by approximately 330 positions.