Job Cuts Announced by Alcoa

Submitted by Share Trading on 8 January, 2009 - 09:20

Alcoa (AAI), the third largest producer of aluminium followed by Rio Tinto (RIO), Alcan and Rusal has announced that it will reduce its global workforce by 13%, or about 13,500 positions, by the end of this year through targeted job cuts, curtailments and plant closures and consolidations. The company also said it will eliminate an additional 1,700 contractor jobs and that it has instituted a global salary and hiring freeze.

As a result, the company on Tuesday projected capital expenditure for 2009 to be $1.8 billion, down 50% from the 2008 level. Alcoa said it expects total charges for the recently concluded fourth quarter due to restructuring, impairment and other special charges to be $900 million to $950 million after tax, or $1.13 to $1.19 per share. Alcoa shares, which have traded in a range of $6.80 to $44.77 over the past year, closed Tuesday's regular trading session at $12.12, up 26 cents or 2.19% but lost 48 cents or 3.96% in after hours trading.

Commenting on the issue Klaus Kleinfeld, chief executive of Alcoa “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”. He added that “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”.

Alcoa lost its position as the world's largest producer of primary aluminum after the merger that led to the creation of Russia's United Co. Rio Tinto Group acquired Canadian aluminum producer Alcan Inc. for $38.1 billion last July, pushing Alcoa to the third position. It seems Alcoa's previous cost cutting moves were not enough, forcing the company to take some more aggressive actions to remain competitive in the recent business environment. It is to be seen whether the companies, who have earlier announced similar cost-cutting measures, will follow suit or not.