Printer Friendly Version
In addition to www.alcoa.com, Alcoa is an active participant in and uses social media to communicate information about the company. Facebook, Twitter, YouTube and LinkedIn are powerful tools that allow us to connect with our customers, investors, potential employees and fans.
Alcoa on Facebook
Alcoa on LinkedIn
Alcoa on Twitter
AlcoaTV on Youtube
January 22, 2004
Alcoa Sets New 3-Year Cost-Savings Challenge; Company Seeks Additional $1.2 Billion in Annual Savings by 2006; Would Bring Total Savings to More Than $3.3 Billion Since 1998
PITTSBURGH--(BUSINESS WIRE)--Jan. 22, 2004--
Alcoa Also Reaffirms and Strengthens Its Return On Capital Goal
At a meeting with analysts and investors today, Alcoa Chairman and Chief Executive Officer, Alain Belda, announced a new company-wide, three-year cost savings challenge, following the successful completion of Alcoa's 2001-2003 cost-savings program in which it achieved $1.012 billion in annual savings. Belda also reaffirmed and expanded upon the Company's goal of striving to join the first quintile of S&P Industrials in return on capital (ROC) performance.
The new 2004-2006 cost-savings program, which is based on the principles of the Alcoa Business System, calls for a reduction of $1.2 billion in annual expenditures by the end of 2006. Upon completion of this program, the company's third three-year cost savings challenge, Alcoa will have eliminated more than $3.3 billion in costs, while building closer ties to its customers and building for the future. Cost savings within this program are sustainable reductions in expenditures and exclude certain items such as energy and currency impacts. These savings have helped offset unfavorable effects since the beginning of the first challenge, including those in energy, health and welfare benefits, currency, and declines in price and mix.
"Alcoans' continued implementation of The Alcoa Business System - our management system that begins with an understanding of customers' requirements, identifies the activities and items needed to meet the requirements, and then enables all employees throughout the company to eliminate anything that is unnecessary - has dramatically increased our productivity and brought us closer to our customers," said Belda.
"Since 1998 the Alcoa Business System has helped deliver more than $2.1 billion in cost savings," added Belda. "Through our employees' continued application of ABS, we will seek to eliminate an additional $1.2 billion in waste; it is important to note that this is not a people-reduction initiative."
Significant savings have been garnered in a number of areas of the company, including, procurement via improved purchasing practices and global sourcing, manufacturing productivity via improved flow paths, and administrative savings through streamlined processes. These areas and others throughout the company will continue in this new cost savings drive.
At the meeting with analysts and investors, Belda also discussed the company's goal of providing superior returns, including a renewal of its aspiration to join the first quintile of S&P Industrials in return on capital (ROC) performance. Belda said that in pursuit of this ROC goal, the company would seek to provide, at a minimum, returns in excess of the cost of capital, regardless of general economic and aluminum cycles. The cost of capital is currently approximately 9%.
Alcoa's fourth quarter ROC on an annualized basis was 7.6%, versus a company ROC of 4.2% in 2002. The first quintile hurdle currently is approximately 16 percent.
Belda noted that the company's most senior executives will now have more of their compensation at-risk, and directly linked to the attainment of financial goals relative to the performance of other top-tier companies. This will be achieved through a new performance share design, which is at risk depending on Alcoa's relative ROC performance each year.
Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa's businesses to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap(R) foils and plastic wraps, Alcoa(R) wheels, and Baco(R) household wraps. Among its other businesses are vinyl siding, closures, fastening systems, precision castings, and electrical distribution systems for cars and trucks. The company has 120,000 employees in 41 countries. More information can be found at www.alcoa.com
Forward Looking Statement
Certain statements in this release relate to future events and expectations and as such constitute forward-looking statements involving known and unknown risks and uncertainties that may cause actual results, performance or achievements of Alcoa to be different from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include (a) the company's inability to achieve the level of cost savings or productivity improvements anticipated by management, (b) unexpected changes in global economic, business, competitive, market and regulatory factors, and (c) the other risk factors summarized in Alcoa's 2002 Form 10-K Report and other SEC reports.