Aluminum producer Alcoa Inc is cutting roughly 13 percent of its global workforce by the end of the year as it slashes costs in the face of a deteriorating world economy.
The elimination of 13,500 jobs, along with deep production and spending cuts, follow cost-saving measures unveiled by the Pittsburgh-based company last fall. At that time it reported a 52 percent decline in third-quarter earnings, citing sharply lower aluminum prices, weaker demand and a charge for curtailing a Texas smelter.
The latest moves also include the slashing of 1,700 contractor positions and the planned sale of four business units. Alcoa — the world’s third-largest aluminum maker — has also imposed a global salary and hiring freeze.
The company said it will reduce aluminum production by an additional 135,000 tonnes per year, lowering output by a total of more than 750,000 tonnes, or 18 percent, annually. Alcoa makes the metal and uses it to manufacture products such as truck wheels and jet wing parts.
Alcoa said the reductions would mean charges totaling between US$900 million and US$950 million in the fourth quarter of last year and savings of about US$450 million annually, before taxes. The company is scheduled to report quarterly results on Monday.
“These are extraordinary times, requiring speed and decisiveness to address the current economic downturn,” Klaus Kleinfeld, Alcoa’s president and chief executive, said in a statement. “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.”
As part of the plan, Alcoa will sell its electrical and electronic systems, global foil, cast auto wheels and European transportation products businesses.
Those units, which employ a total of 22,600 people at 38 locations, operated at a loss of US$105 million on revenue of US$1.8 billion last year. The company expects net proceeds of about US$100 million from the sales.
Kevin Lowery, an Alcoa spokesman, said he did not have a breakdown of the job cuts by country. The company employs at least 94,000 people in 34 countries, though the size of the total workforce fluctuates, he said.
Analyst Charles Bradford of Bradford Research/Soleil Securities said Alcoa’s production cuts will not help put a floor under aluminum prices, which fell to roughly US$0.65 per pound a few weeks ago from US$1.50 per pound in July.
Broader production cuts are needed by Alcoa and its competitors, such as Rio Tinto Group and aluminum producers in China, Bradford said, as prices are unlikely to stabilize unless more drastic steps are taken.
Other companies that have faced the difficult market conditions include Moscow-based Rusal, the world’s top aluminum producer, and Rio Tinto, the mining giant that acquired Canada-based Alcan Inc in 2007.