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Alcoa Vision & Strategy
At Alcoa, our vision is to be the best company in the world—in the eyes of our customers, shareholders, communities, and people.
Supporting that vision are our values and principles and a business strategy that integrates our sustainability approach, which includes our 2020 Strategic Framework for Sustainability, and builds upon opportunities in our various markets.
Market Outlook
Total world consumption for aluminum grew by 10% in 2007, and demand is expected to double by 2020 from the year 2005. The vast majority of this growth will be in China, but there will be significant growth in India, the Commonwealth of Independent States (which includes Russia), the Middle East, and Latin America. Our internal analysis anticipates that 2008 growth will follow this trend.
Global macro trends continue to support and drive up aluminum consumption—absorbing the considerable supply growth we have seen in the last two years. Specifically, this demonstrates the great continuing future for our preferred metal, as it plays a significant role in developing economies' infrastructure. This includes light weighting of transportation equipment and special applications where aluminum is not substitutable. In addition, aluminum's characteristics of light weight, strength, and fuel efficiency will continue to propel its use as one of the premier options in helping the world deal with climate change.
Primary Aluminum Consumption Growth Rates
In April 2008, we projected that all of our end markets will grow on a global basis in 2008, although there will be strong regional disparities.
2008 Market Outlook
Business Strategy
For 2008 and beyond, we have focused our business strategy on achieving the following in a sustainable and reliable manner:
- Continue to improve margins through productivity and value-added products;
- Add to and take advantage of our world-class bauxite and alumina positions and continue to secure low-cost, stranded power;
- Invest in opportune growth projects, such as manufacturing facilities in China and other parts of Asia, and the bauxite reserves and associated refinery and hydroelectric projects in Brazil;
- Evaluate upstream opportunities in Greenland, Iceland, Vietnam, China, and the Middle East;
- Re-power our existing smelters, as success in this area will generate significant shareholder value with lower capital intensity than building greenfield smelters, especially considering today's construction costs;
- Deliver new products and applications to rapidly expanding common end markets through innovative and proprietary technology solutions, unique equipment, and complex processes;
- Execute a balanced approach to capital management;
- Conduct business in an ethical manner and obey all laws and regulations;
- Enhance the economic and social well-being of the communities in which we operate; and
- Operate worldwide in a manner that minimizes effects on natural habitats and biological resources.
Please see the Economic section for more detailed information on how we are driving growth across our business.
Major Challenges
There are a number of challenges that face our company as we seek to expand our operations and more fully integrate sustainability into our business. Major ones include the following:
- Eliminating fatalities from our workplace.
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- Finding low-cost, reliable energy sources. more
- Maintaining our 25% reduction in greenhouse gas emissions while increasing production. more
- Reducing our freshwater consumption and mercury emissions to achieve our short- and long-term goals. more
- Attracting and retaining top talent in an increasingly competitive labor market. more
Risk Assessment
A discussion of the risks Alcoa faces can be found in the Form 10-K for the year ended December 31, 2007. Some major risks, including links to examples of how we are mitigating them, include the following:
- Material adverse changes in aluminum industry or economic conditions generally or in the markets served by Alcoa.
- Cyclical nature of the industry, with prices subject to worldwide supply and demand.
- Rising energy costs or interrupted or unavailable energy supplies. go
- Increase in the cost of raw materials. go
- Union disputes and other employee relations issues. go
- Fluctuations in foreign currency exchange rates and interest rates.
- Significant legal proceedings or investigations or the disposition of current proceedings or investigations other than as anticipated by Alcoa's management.
- Adverse effects on Alcoa's operations or markets or the global economy as a result of climate change or climate change regulations. go
- Significant costs and liabilities associated with numerous complex and increasingly stringent environmental laws and regulations. go
- Changes in the business or financial condition of a significant customer or customers.
- Changes in the laws or governmental policies in the countries in which Alcoa operates. go
Measuring Success
We have a long history of using metrics as a means to drive change within the company. One of the most visible and effective drivers is our 2020 Strategic Framework for Sustainability, which helps guide our businesses and measure our progress toward our vision for 2020.
Supporting that framework is a variety of systems and processes that collect data from our global operations and make them available to those who need the information to evaluate performance and drive continuous improvement.
For example, we initiated a process in 1988 to collect and display current, detailed information on safety in a way that would be available to all employees who need the information to evaluate performance and drive continuous improvement. We have expanded the original data system to include incident management, and we now use the system for all environmental, health, and safety data collection, incident management, and reporting.
At any time, we can use the system to determine current safety statistics, including accidents or near misses that occur anywhere in the world on a particular day. We can also view detailed reports on incidents, review the corrective action plans or status of a corrective action, and evaluate our progress toward our goals in environment, health, and safety. The system is an excellent management tool that has helped us facilitate our rapid progress in these areas.
As part of our commitment to openness and transparency, we began publishing real-time safety data publicly on www.alcoa.com in 2003 to provide timely insight into our performance on this critical measure.
We continue to work on determining what regional or global metrics are required to guide us toward the achievement of sustainability, particularly in the more complex and difficult-to-measure social aspects of our operations.
Industry Leadership
As a leader in the aluminum industry, we believe it is our responsibility to help shape the direction of the industry to ensure it is continually improving and moving toward a more sustainable future.
One of the ways we do this is to be a major participant in industry associations and organizations. We go beyond just paying membership dues to having our company's senior leaders and experts serve as officers, committee members, and information resources. Please see our list of stakeholders for more detailed information on our industry participation.
We also take a leadership position on major issues facing our industry, such as climate change. Not only are we a founding member of the U.S. Climate Action Partnership, we also are a charter member of the World Resources Institute Green Power Market Development Group.
Additional information can be found in the Sustainability Approach section.
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Aluminum-Making Process
It all starts with dirt.
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