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January 8, 2003

Alcoa Acts to Lower Costs, Focus its Portfolio and Increase Long-Term Earnings Power; Announces 4th Quarter Loss Due to One-time Restructuring, Divestiture and Goodwill Charges

PITTSBURGH--(BUSINESS WIRE)--Jan. 8, 2003--Alcoa Inc. (NYSE:AA) today announced actions designed to accelerate its cost reduction initiatives and further focus its business portfolio to increase long-term earnings power. These fourth quarter actions include significant restructuring efforts, particularly the sale of certain non-core businesses. For the fourth quarter 2002, Alcoa announced a net loss of $223 million, or $0.27 per diluted share, according to Generally Accepted Accounting Principles.

Sales for the fourth quarter were $5.06 billion compared to $5.10 billion in the fourth quarter of 2001. Sales for the year were $20.26 billion compared to $22.50 billion for 2001. The loss for the fourth quarter of $0.27 per diluted share compared to earnings of $0.23 in the third quarter of 2002, and a loss of $0.17 in the fourth quarter of 2001. Net income for the year 2002 was $0.49 per diluted share compared to $1.05 in 2001. The 2002 results were negatively impacted by significantly lower realized prices for primary aluminum and alumina, and lingering weaknesses in key end markets.

Excluding one-time charges, income from continuing operations was $133 million, or $0.16 per diluted share in the quarter (see attached schedule). Included within income from continuing operations was approximately $40 million ($0.05 per diluted share) in various non-recurring after tax charges, the largest of which is an increase to its environmental reserves, principally for the Grasse River site in New York. Through its Alcoa Business System, the company also recorded a $40 million after-tax LIFO benefit by continuing to reduce inventories and capturing the resulting savings.

"Global manufacturing weakness has persisted longer than we anticipated," said Alain Belda, Alcoa Chairman and CEO. "In particular, aerospace, industrial gas turbine and telecommunication markets remained soft, reinforcing the need to increase the scope of our cost savings and restructuring initiatives. These initiatives will give us increased flexibility for future profitable growth opportunities in our core activities."

Alcoa recorded a special after-tax charge of $95 million in the fourth quarter of 2002 to restructure operations of businesses serving the aerospace, automotive and industrial gas turbine markets, and in the U.S. smelting system. The restructuring includes operations that have experienced negligible growth, particularly in Europe and South America. The after-tax charge includes costs for employee severance and asset rationalization, and will affect approximately 8,000 employees at over 70 locations. While these restructuring actions will take place in 2003, the majority of the economic benefits will be realized in 2004.

Alcoa also announced that it has conducted a portfolio review of its businesses and the markets they serve. It has established ongoing criteria for aluminum and non-aluminum businesses, including the ability to grow in excess of GDP or deliver superior returns in sectors where Alcoa has a sustainable competitive advantage. As a result of this review, Alcoa intends to divest certain businesses that do not meet these criteria in sectors such as alumina and chemicals, packaging, building and construction, automotive and general industrial and distribution. Certain of the businesses to be divested include specialty chemicals, specialty packaging equipment, architectural products in North America, commodity automotive fasteners, certain fabricated operations in South America, a minority equity stake in Latasa, and foil facilities in St. Louis, Missouri and Russellville, Arkansas. These businesses generated approximately $1.3 billion in total revenues in 2002. Proceeds from the sales will be deployed primarily to reduce debt, increasing the company's flexibility for future growth opportunities in its core businesses. The company recorded an after tax charge of $221 million in the fourth quarter of 2002 on the divestitures, $78 million of which related to discontinued operations.

"The actions announced today further Alcoa's drive to improve our cost position in ongoing operations around the world, focus on customers in key downstream sectors, and grow in core markets," said Belda. "These initiatives, in conjunction with our continued focus on the application of the Alcoa Business System, will ensure that we will exceed our cost savings targets for 2003."

At the end of the 2002 fourth quarter, Alcoa had achieved $600 million in annualized cost savings toward its $1.0 billion 2003 goal. The run rate at the end of the fourth quarter was $150 million, compared with $140 million in the prior quarter.

As part of its annual review of goodwill, Alcoa also recorded a $20 million impairment associated with assets serving the telecommunication market.

For the year 2002, net income was $420 million, or $.49 per share. Excluding one-time charges, income from continuing operations was $779 million, or $.92 per share. Excluding one-time charges, the effective tax rate for 2002 was 30%.

As previously announced, Alcoa's accumulated pension obligation exceeded the fair value of plan assets at year-end, which resulted in an $820 million charge to equity. Cash contributions to the major pension plans in 2003 are not projected to be materially different than in 2002.

Alcoa began 2002 with 129,000 employees throughout the world. During the year it completed a number of key acquisitions in core markets including Ivex Packaging and Fairchild Fasteners with approximately 8,000 employees. The company completed the year with 127,000 employees.

Quarterly Analyst Meeting

Alcoa's quarterly analyst meeting will be at 4:00 p.m. EDST on Thursday, January 23, 2003. The meeting will be webcast via www.alcoa.com

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, precision castings, and electrical distribution systems for cars and trucks. The company has 127,000 employees in 38 countries. More information can be found at www.alcoa.com

Editor's Note: The Alcoa Business System is an integrated set of systems, tools and language organized to encourage unencumbered transfer of knowledge across businesses and borders. It focuses on serving customer demand by emphasizing the elimination of all waste and making what the customer wants, when the customer wants it.

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 the company's inability to achieve the level of cost savings or productivity improvements anticipated by management, including possible increases in the cost of doing business resulting from war or terrorist activities; and other risk factors summarized in Alcoa's SEC reports.

Financial Report
Alcoa and Subsidiaries
Supplemental Net Income and EPS Information
(in millions, except for per share amounts)


                            Net Income               Diluted EPS
                       4Q02    3Q02    4Q01     4Q02    3Q02     4Q01
                       ----    ----    ----     ----    ----     ----
Net (loss) income     $(223)   $193   $(142)  $(0.27)  $0.23   $(0.17)
One-time charges:
  Goodwill impairment    20       -       -
  Special items - 
    restructurings       95      23     241
  Special items - loss 
    on divestitures     143       -       -
  Discontinued operations 
    - operating loss     20       9       4
  Discontinued operations 
    - loss on 
    divestitures         78       -       -
  Goodwill amortization   -       -      43
                      ---------------------
Income from continuing 
  operations excluding 
  one-time charges    $ 133    $225   $ 146   $ 0.16   $0.27   $ 0.17
                      =====================

Average diluted shares outstanding               844     847      849


                          Net Income              Diluted EPS
                        2002    2001             2002    2001
                        ----    ----             ----    ----

Net income             $ 420    $908           $ 0.49   $1.05
One-time charges:
  Goodwill impairment     20       -
  Special items 
    - restructurings     118     355
  Special items - loss 
    on divestiture       143       -
  Discontinued operations 
    - operating loss 
    (income)              34      (1)
  Discontinued operations 
    - loss on 
    divestitures          78       -
  Cumulative effect of 
    accounting change    (34)      -
  Goodwill amortization    -     171
                        ------------    
Income from continuing 
  operations excluding 
  one-time charges     $ 779  $1,433           $ 0.92   $1.65
                        ============

Average diluted shares 
  outstanding                                     850     867



FINANCIAL REPORT
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)

                                                 Twelve months ended
                                                     December 31
                                                     -----------
                                                 2002          2001
                                              ---------     ---------

Sales                                         $  20,263     $  22,497

Cost of goods sold                               16,247        17,539
Selling, general administrative and
 other expenses                                   1,147         1,256
Research and development expenses                   214           203
Provision for depreciation, depletion and
 amortization                                     1,108         1,234
Impairment of goodwill                               44             -
Special items                                       407           565
Interest expense                                    350           371
Other income, net                                  (179)         (308)
                                              ---------     ---------

                                                 19,338        20,860

Income from continuing operations before
 taxes on income                                    925         1,637
Provision for taxes on income                       292           522
                                              ---------     ---------
Income from continuing operations before
 minority interests' share                          633         1,115
Less:  Minority interests' share                    135           208
                                              ---------     ---------

Income from continuing operations                   498           907

(Loss) Income from discontinued operations,
 net of tax benefit of $50 in 2002                 (112)            1

Cumulative effect of accounting change
 for goodwill                                        34             -
                                              ---------     ---------

NET INCOME                                    $     420     $     908
                                              =========     =========

Earnings per common share:
  Basic:
    Income from continuing operations         $    0.59     $    1.06
    Loss from discontinued operations             (0.13)            -
    Cumulative effect of accounting change         0.04             -
    Net income                                $    0.50     $    1.06

  Diluted:
    Income from continuing operations         $    0.58     $    1.05
    Loss from discontinued operations             (0.13)            -
    Cumulative effect of accounting change         0.04             -
    Net income                                $    0.49     $    1.05

Average number of shares used to compute:
  Basic earnings per common share           845,438,913   857,990,395
  Diluted earnings per common share         849,848,984   866,561,053

Common stock outstanding at the end of
 the period                                 844,819,462   847,581,876

Currency translation adjustments included
 in net income                                $      (4)    $      12

Shipments of aluminum products
 (metric tons)                                5,208,000     4,960,000
 
Return on average shareholders' equity              3.9%          8.3%


Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)

                                                Fourth quarter ended
                                                    December 31
                                                    -----------
                                                 2002          2001
                                              ---------     ---------

Sales                                         $   5,061     $   5,100

Cost of goods sold                                4,088         4,233
Selling, general administrative and
 other expenses                                     339           349
Research and development expenses                    58            52
Provision for depreciation, depletion and
 amortization                                       297           310
Impairment of goodwill                               44             -
Special items                                       368           353
Interest expense                                     97            78
Other income, net                                   (67)         (112)
                                              ---------     ---------

                                                  5,224         5,263

Loss from continuing operations before
 taxes on income                                   (163)         (163)
Benefit for taxes on loss                            36            53
                                              ---------     ---------
Loss from continuing operations
 before minority interests' share                  (127)         (110)
Less:  Minority interests' share                     (2)           28
                                              ---------     ---------

Loss from continuing operations                    (125)         (138)

Loss from discontinued operations,
 net of tax benefit of $42 in 2002                  (98)           (4)
                                              ---------     ---------

NET LOSS                                      $    (223)    $    (142)
                                              =========     =========

Loss per common share:
  Basic:
    Loss from continuing operations           $   (0.15)    $   (0.17)
    Loss from discontinued operations             (0.12)            -
    Net loss                                  $   (0.27)    $   (0.17)

  Diluted:
    Loss from continuing operations           $   (0.15)    $   (0.17)
    Loss from discontinued operations             (0.12)            -
    Net loss                                  $   (0.27)    $   (0.17)


Average number of shares used to compute:
  Basic earnings per common share           844,456,673   848,675,958
  Diluted earnings per common share         844,456,673   848,675,958

Currency translation adjustments included
 in net income                                $       2     $       8

Shipments of aluminum products
 (metric tons)                                1,320,000     1,162,000


Alcoa and subsidiaries
Segment Information (unaudited)
(in millions, except realized prices)

Consolidated Third-
 Party Revenues        4Q01   2001   1Q02   2Q02   3Q02   4Q02   2002
                     -------------------------------------------------
Alumina and Chemicals   417  1,908    425    419    469    430  1,743
Primary Metals          685  3,432    764    788    792    830  3,174
Flat-Rolled Products  1,182  4,999  1,156  1,192  1,162  1,130  4,640
Engineered Products   1,333  5,765  1,319  1,330  1,238  1,131  5,018
Packaging and
 Consumer               697  2,691    618    672    752    840  2,882
Other                   786  3,702    618    757    731    700  2,806
                     -------------------------------------------------
Total                 5,100 22,497  4,900  5,158  5,144  5,061 20,263

Consolidated
 Intersegment
 Revenues              4Q01   2001   1Q02   2Q02   3Q02   4Q02   2002
                     -------------------------------------------------
Alumina and Chemicals   217  1,021    229    233    235    258    955
Primary Metals          707  3,300    878  1,001    888    849  3,616
Flat-Rolled Products     13     64     15     18     21     14     68
Engineered Products       9     35      8     10      8      8     34
Packaging and
 Consumer                 0      0      0      0      0      0      0
Other                     0      0      0      0      0      0      0
                     -------------------------------------------------
Total                   946  4,420  1,130  1,262  1,152  1,129  4,673

Consolidated Third-
 Party Shipments
 (KMT's)               4Q01   2001   1Q02   2Q02   3Q02   4Q02   2002
                     -------------------------------------------------
Alumina and Chemicals 1,667  7,217  1,825  1,796  1,939  1,926  7,486

Primary Metals          455  1,873    503    507    517    546  2,073
Flat-Rolled Products    456  1,818    439    456    446    433  1,774
Engineered Products     197    900    221    244    223    203    891
Packaging and
 Consumer                26    141     30     31     46     55    162
Other                    28    228     58     87     80     83    308
                     -------------------------------------------------
Total Aluminum        1,162  4,960  1,251  1,325  1,312  1,320  5,208

Average realized
 price
-Primary               0.65   0.72   0.66   0.67   0.66   0.66   0.66

After-Tax Operating
 Income (1)            4Q01   2001   1Q02   2Q02   3Q02   4Q02   2002
                     -------------------------------------------------
Alumina and Chemicals    60    471     65     73     93     84    315
Primary Metals          131    905    143    175    175    157    650
Flat-Rolled Products     64    262     61     66     46     47    220
Engineered Products      13    170     58     44     33    (28)   107
Packaging and
 Consumer                49    184     28     55     51     64    198
Other                   (52)    47      7     19      8    (43)    (9)
                     -------------------------------------------------
Total                   265  2,039    362    432    406    281  1,481

Reconciliation of
 after-tax operating
 income (ATOI) to
 consolidated net
 income                4Q01   2001   1Q02   2Q02   3Q02   4Q02   2002
                     -------------------------------------------------

Total ATOI              265  2,039    362    432    406    281  1,481
Impact of
 intersegment profit
 eliminations            (2)   (20)    (3)    (1)    (5)     3     (6)
Unallocated amounts
 (net of tax):
Interest income          10     40     10      9      7      5     31
Interest expense        (51)  (242)   (49)   (54)   (62)   (62)  (227)
Minority interests      (28)  (208)   (41)   (47)   (49)     2   (135)
Corporate expense       (84)  (261)   (58)   (53)   (40)   (83)  (234)
Special items          (249)  (397)     -      -    (25)  (261)  (286)
Discontinued
 operations              (4)     1      -     (5)    (9)   (98)  (112)
Accounting change         -      -     34      -      -      -     34
Other                     1    (44)   (37)   (49)   (30)   (10)  (126)
                     -------------------------------------------------
Consolidated net
 income                (142)   908    218    232    193   (223)   420

(1) Under the provisions of SFAS No. 142, effective January 1, 2002,
    goodwill is no longer amortized. This resulted in a positive
    impact to segment ATOI results in the 2002 fourth quarter as
    follows: Primary $6, Flat-Rolled Products ($1), Engineered
    Products $16, Packaging and Consumer $4, and Other $7. $11 was
    recorded in corporate.


Alcoa and subsidiaries
Condensed Consolidated Balance Sheet
(in millions)

                                             (unaudited)
                                             December 31   December 31
                                                 2002         2001
                                             ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents                           $344         $512
Short-term investments                                69           15
Receivables from customers, less allowances:
  $120 in 2002 and $121 in 2001                    2,378        2,386
Other receivables                                    174          286
Inventories                                        2,441        2,385
Deferred income taxes                                468          409
Prepaid expenses and other current assets            439          456
                                             ------------ ------------
     Total current assets                          6,313        6,449

Properties, plants and equipment, at cost         23,120       21,874
Less: accumulated depreciation, depletion and
  amortization                                    11,009       10,344
                                             ------------ ------------
Net properties, plants and equipment              12,111       11,530
                                             ------------ ------------

Goodwill                                           6,365        5,597
Other assets                                       4,816        3,828
Assets held for sale                                 575          951
                                             ------------ ------------
     Total assets                                $30,180      $28,355
                                             ============ ============

LIABILITIES
Current liabilities:
Short-term borrowings                                $37         $162
Accounts payable, trade                            1,618        1,539
Accrued compensation and retirement costs            933          871
Taxes, including taxes on income                     818          904
Other current liabilities                            970        1,307
Long-term debt due within one year                    85          102
                                             ------------ ------------
     Total current liabilities                     4,461        4,885
                                             ------------ ------------
Long-term debt, less amount due within one
 year                                              8,365        6,384
Accrued postretirement benefits                    2,858        2,513
Other noncurrent liabilities and deferred
 credits                                           2,710        1,968
Deferred income taxes                                502          556
Liabilities of operations held for sale               64          122
                                             ------------ ------------
     Total liabilities                            18,960       16,428
                                             ------------ ------------

MINORITY INTERESTS                                 1,293        1,313
                                             ------------ ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock                                       55           56
Common stock                                         925          925
Additional capital                                 6,101        6,114
Retained earnings                                  7,428        7,517
Treasury stock, at cost                           (2,828)      (2,706)
Accumulated other comprehensive loss              (1,754)      (1,292)
                                             ------------ ------------
     Total shareholders' equity                    9,927       10,614
                                             ------------ ------------
     Total liabilities and equity                $30,180      $28,355
                                             ============ ============