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July 30, 2003
Alcoa Prepares for Shutdown of Intalco Smelter
PITTSBURGH--(BUSINESS WIRE)--July 30, 2003--Alcoa (NYSE:AA)
announced today that it is preparing to temporarily curtail production
at its Ferndale, Washington ("Intalco") aluminum smelter on September
30, 2003 because of an expected Bonneville Power Administration
("BPA") rate increase, sharply increasing costs at the plant. In
April, the company announced that higher power rates would make the
plant uncompetitive globally. As required by the Worker Adjustment and
Retraining Notification Act (WARN), Alcoa has sent notices to all
Intalco employees advising them that layoffs or closure are possible
after 60 days.
"Since there has been no indication that BPA will significantly
lower power rates, we have to prepare for a curtailment," said Bernt
Reitan, Vice President -- Alcoa and President of Alcoa Primary Metals.
"In fairness to our employees, our shareholders and the community, we
felt we must proceed with the notification."
The plant will curtail operations unless there is significant
change in the power price or market conditions overall. The closing is
expected to lower Alcoa's net income for the third quarter of 2003 by
approximately $4 million as a result of closure and severance costs.
Production and Energy at Intalco
Alcoa is currently running two full pot-lines at the Intalco plant
with approximately 110,000 metric tons per year of production. Alcoa's
interim power supply agreement with BPA is scheduled to expire on
September 30, 2003, and the price increases are scheduled to go into
effect at that time. In the future, Alcoa may adjust production at
Intalco as market conditions warrant.
Impact on Workforce
The Worker Adjustment and Retraining Notification Act notice will
state that the last day of work for all employees is October 1, 2003.
Employees will be paid through September 30th. If Intalco is able to
secure power rates that allow it to operate at a profitable level and
curtailment is not necessary, the workforce would receive a
cancellation of the notice.
The employees at Intalco have also qualified for federal
retraining benefits under the 1974 Trade Act. All workers who are laid
off or whose jobs are reduced to part time between May 14, 2002 and
June 26, 2005 may be eligible for benefits and services in addition to
those allowed under state law.
Alcoa owns 61 percent of the Intalco facility with the remainder
owned by a Japanese consortium.
Alcoa Smelting Capacity
When the Intalco curtailment is implemented, the company will have
approximately 615,000 mtpy of idled capacity on a base primary
aluminum capacity of 3.9 million mtpy.
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 as a single solution 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 127,000
employees in 40 countries. For more information go to 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 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 cost-savings for the facility, power costs, economic
incentives and other risk factors summarized in Alcoa's Form 10-K for
the year ended December 31, 2002.