Alcoa: News: News Releases: Alcoa Reduces Capacity; Continues To Implement Its Long-Term, Low-Cost Production Strategy

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July 31, 2002

Alcoa Reduces Capacity; Continues To Implement Its Long-Term, Low-Cost Production Strategy

PITTSBURGH--(BUSINESS WIRE)--July 31, 2002--Alcoa Inc. today announced a series of moves continuing implementation of its long-term, low-cost production strategy, within the context of a weak economy:

The temporary curtailment of aluminum production at its 120,000 metric tons per year (mtpy) primary aluminum facility at Badin, North Carolina which has been operating at 90,000 mtpy since September 2000. Curtailment will begin immediately, and all production will be idled by August 16. Ingot-casting operations will continue for the next few months, but will likely end by December 31, 2002. The plant employs 377 employees in the smelting and ingot-casting operations.
The permanent closure of capacity currently idle at its Troutdale, Oregon facility. Troutdale's entire 121,000 mtpy capacity was temporarily curtailed in June 2000.
The permanent closure of capacity currently idle at its Rockdale, Texas facility. A total of 76,000 mtpy of Rockdale's 320,000 mtpy capacity has been idle for the past several years.
The assets at both Troutdale and Rockdale will be dismantled.

"Our growth strategy in primary metals is based upon both moving down the cost curve while maintaining return on capital targets. As we explore projects around the world we must take a hard look at assets in the United States, where escalating energy and labor costs have made many smelters less globally competitive," said Al Renken, president of Alcoa Primary Metals. "Today's actions demonstrate that Alcoa will actively manage its assets during weak economic conditions. We regret the impact these actions will have on our employees and the communities, and we will work to make the transition as smooth as possible. Throughout the year, we will continue to explore potential adjustments - both closings and restarts - as market conditions warrant."

The cost of today's announced actions will impact third quarter 2002 earnings as a special charge of $15 to $20 million in after tax earnings.

Following today's adjustments, Alcoa will have 438,000 mtpy of aluminum production idled on a base capacity of 3,948,000 mtpy. The company said these actions will have no adverse impact on internal or external customers.

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) aluminum foil, Alcoa(R) wheels, and Baco(R) household wraps. Among its other businesses are vinyl siding, closures, precision castings, and electrical distribution systems for cars and trucks. The company has 129,000 employees in 38 countries.

Alcoa (NYSE:AA)

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 related to this memorandum of understanding 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 Alcoa's inability to achieve the returns necessary to implement projects, economic or competitive factors and other risk factors summarized in Alcoa's Form 10-K for the year ended December 31, 2001.