US aluminium producer Alcoa said last night would slash more than 15,000 jobs, halve capital spending and sell four businesses as it reduces aluminum production in the face of the global economic downturn.
Alcoa imposed a global salary and hiring freeze as it seeks to cope with what chief executive officer Klaus Kleinfeld called "extraordinary times."
The cuts, the third in as many months, come less than a week before Alcoa is scheduled to report its fourth-quarter results. Alcoa said it would take almost $1 billion in charges in the quarter.
In after-hours trading following the news, Alcoa's shares were down nearly 4 per cent at $11.64.
"Alcoa is going to get hit by some really big metal price declines and the only way to fix it is to reduce output," said analyst Charles Bradford, of Bradford Research/Soleil. "I think they need to do more. That's the only thing you can do to get the price going."
Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland, said the cuts could help Alcoa in the long run.
"As demand dropped off in the fourth quarter of 2008, steel companies were quick to cut production. I think the market will reward them for taking this capacity off line and cutting staff. It's smart in this environment."
Alcoa said targeted reductions, curtailments and plant closures and consolidations, mostly in the United States and Europe, including Russia, would reduce its headcount by more than 13,500 employees or 13 per cent of the worldwide workforce by the end of 2009. An additional 1,700 contractor positions also will be eliminated.
Also, smelting reductions of more than 135,000 tonnes per year will be implemented, resulting in reduction of total primary aluminium output by more than 750,000 tonnes, or 18 per cent of annualized output.
In November, Alcoa said it would cut 350,000 tonnes of production and in October it curtailed output at its 265,000-tonne smelter in Rockdale, Texas.
Production of alumina, which is refined from bauxite and smelted into aluminium, also will be reduced accordingly to a total of 1.5 million tonnes in response to market conditions, Alcoa said. Curtailments will be fully implemented by the end of the first quarter 2009.
Alcoa said total charges for the fourth quarter due to restructuring, impairment and other special charges are expected to be between $900 million and $950 million after tax, or $1.13 to $1.19 per share, of which about 80 per cent is non-cash.
The restructuring and divestiture program is expected to save about $450 million before taxes on an annualized basis, it said. Capital expenditures in 2009 are projected to be down to $1.8 billion, a 50-per cent decrease from 2008.
Reuters