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| November 19, 2009
Alcoa to Idle Smelting Operations in Italy While Appealing EC Ruling on Energy Tariff
Fusina and Portovesme Smelters, With
2,000 Direct and Indirect Jobs and Combined Aluminum Capacity of 194,000
Mtpy, To Be Temporarily Curtailed
NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE:AA) today announced it will temporarily idle production at
its two aluminum smelters in Fusina and Portovesme, Italy. The
curtailment is a result of uncertainty in obtaining future power supply
for the smelters at competitive rates and the financial impact of
today’s European Commission (EC) decision that Italy’s extension of the
existing electricity tariff after 2005 did not comply with European
Union (EU) state aid rules and that a portion of the benefit received by
Alcoa must be refunded. Alcoa is appealing the decision.
The tariff was in place for more than 10 years in Italy and approved by
the EC in 1995, the year that Alcoa purchased the operations. It was
designed to provide competitive power to energy-intensive industries in
Italy, in line with similar energy costs in other EU countries.
“This is a dark day for European heavy industry. The EC is sending a
signal to investors and workers that heavy industry is no longer a
priority,” said Klaus Kleinfeld, Alcoa President and Chief Executive
Officer. “Particularly in today’s economic crisis, this decision is hard
to understand. Skilled and long-term jobs will be lost, facilities will
be closed, and companies in Europe will not be able to compete.”
Kleinfeld added, “The EC’s decision, which was not based on a complaint
by a competitor or any third-party, will effectively shut down Italian
aluminum production and make the European aluminum industry less
competitive in the worldwide markets. Alcoa will appeal the decision and
take immediate action to improve the profitability of our smelter
operations.”
Without the tariff, the two smelters, which have a combined employment
of approximately 1,000 and an additional 1,000 indirect jobs and a
combined capacity of 194,000 metric tons of aluminum per year, are not
viable at current Italian power rates.
The process to curtail the smelters will begin immediately, with
completion expected in the second half of December. The company will
work with appropriate works councils and employees at the smelters to
gradually wind down production in a safe and efficient manner. Alcoa’s
rolling mill in Fusina, which is adjacent to the smelter, is not
directly impacted by this action.
“It is a terrible outcome for Italy,” said Marcos Ramos, President of
Alcoa Primary Products Europe, “This EC decision will result in
approximately 2,000 direct and indirect jobs being lost in Italy, not to
mention the impact on the communities of Fusina and Portovesme. We will
continue to use every lever in an attempt to gain access to competitive
power so that we can get our people back to work.”
“I want to thank our employees and work councils, who have been doing an
outstanding job, and our communities for their support," added Mr.
Ramos. “This decision is in no way a reflection on their efforts. In
fact, they have been helpful in explaining the urgency of the situation
to officials.”
As part of the decision, the EC has ordered Italy to recover certain
benefits derived by Alcoa under the tariff. Alcoa already has appealed
the opening of the case by the EC and will also vigorously challenge the
decision in the EU courts.
The curtailments in Italy will bring Alcoa’s total global smelting
system curtailments to approximately 24 percent. The Company will
continue to take steps to optimize its global smelting system as market
conditions warrant. The Company expects to take a fourth quarter 2009
charge of between $300 million and $500 million, pre-tax, including
temporary curtailment and recovery actions. Most, if not all, of the
charge is not expected to impact fourth quarter cash flow.
About Alcoa
Alcoa is the world leader in the production and management of primary
aluminum, fabricated aluminum and alumina combined, through its active
and growing participation 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 including
flat-rolled products, hard alloy extrusions, and forgings, Alcoa also
markets Alcoa® wheels, fastening systems, precision and investment
castings, and building systems. The Company has been named one of the
top most sustainable corporations in the world at the World Economic
Forum in Davos, Switzerland and has been a member of the Dow Jones
Sustainability Index for eight consecutive years. Alcoa employs
approximately 63,000 people in 31 countries across the world. More
information can be found at www.alcoa.com
Forward-Looking Statements
Certain statements in this release relate to future events and
expectations, and as such constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements also include those containing such words as
“anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,”
“outlook,” “plan,” “project,” “should,” “will” or similar expressions.
Forward-looking statements by their nature involve known and unknown
risks, uncertainties and other factors that may cause actual results,
performance or achievements of Alcoa to be different from those
expressed or implied in the forward-looking statements. Alcoa disclaims
any intention or obligation, other than as required by applicable law,
to update or revise any forward-looking statements. Important factors
that could cause actual results to differ materially from those in the
forward-looking statements include: (a) material adverse changes in
economic or aluminum industry conditions generally, including global
supply and demand conditions and fluctuations in London Metal
Exchange-based prices for primary aluminum, alumina and other products;
(b) material adverse changes in the markets served by Alcoa, including
automotive and commercial transportation, aerospace, building and
construction, distribution, packaging, industrial gas turbine and other
markets; (c) Alcoa’s inability to mitigate impacts from significant
increases in energy costs or to extend energy contracts upon expiration
or to negotiate new arrangements on cost-effective terms; (d) Alcoa’s
inability to mitigate impacts from other cost inflation, including
increases in transportation costs or raw materials costs; (e) Alcoa’s
inability to achieve the level of cost reductions, cash generation or
conservation, return on capital improvement, or improvement in
profitability and margins anticipated by management in connection with
its financial and operational strengthening actions; (f) unfavorable
changes in laws, governmental regulations or policies, foreign currency
exchange rates or competitive factors in the countries in which Alcoa
operates; (g) significant legal proceedings or investigations adverse to
Alcoa; and (h) the other risk factors summarized in Alcoa’s Form 10-K
for the year ended December 31, 2008, Forms 10-Q for the quarters ended
March 31, 2009, June 30, 2009, and September 30, 2009 and other reports
filed with the Securities and Exchange Commission.
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