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Alcoa to cut 13 pct of global work force
By DANIEL LOVERING, AP Manufacturing Writer Daniel Lovering, Ap Manufacturing Writer 2 hrs 37 mins ago

PITTSBURGH – Alcoa Inc., the world's third-largest aluminum maker, said Tuesday it will cut 13,500 jobs, or 13 percent of its work force, and slash spending and output to cope with the global economic slowdown.

The reductions expand on cost-cutting measures announced in October, when Alcoa reported a 52-percent decline in third quarter profit, due to sharply lower aluminum prices, weaker demand and a charge from curtailing a smelter in Texas.

In its latest announcement, which came after U.S. markets closed Tuesday, the Pittsburgh-based company said it will sell four business units and impose a global salary and hiring freeze.

Alcoa also said it will further limit smelting by more than 135,000 metric tons per year, lowering total aluminum output by more than 750,000 metric tons, or 18 percent, annually.

As a result of its actions, Alcoa expects total fourth-quarter charges of between $900 million and $950 million and savings of about $450 million annually, before taxes. It plans to report quarterly results Jan. 12.

"These are extraordinary times, requiring speed and decisiveness to address the current economic downturn," Klaus Kleinfeld, Alcoa's president and chief executive, said in a statement.

As part of the plan, Alcoa said it would divest its electrical and electronic systems, global foil, cast auto wheels and European transportation products businesses.

Those units, which employ a total of 22,600 people at 38 locations, had combined 2008 revenues of $1.8 billion, with an estimated after-tax operating loss of about $105 million. The company expects net proceeds from the sales of about $100 million.

Kevin Lowery, an Alcoa spokesman, said he did not have a breakdown of the job cuts by country.

Production of alumina, a material used to make aluminum, will be reduced to 1.5 million metric tons per year in response to market conditions, the company said.

The production cuts are expected to be completed by the end of March.

Analyst Charles Bradford of Bradford Research/Soleil Securities said Alcoa's production cuts will not help put a floor under plummeting aluminum prices, which fell to roughly 65 cents per pound a few weeks ago from $1.50 per pound in July.

Broader production cuts are needed by Alcoa competitors, such as Rio Tinto Group and aluminum producers in China, Bradford said, and prices are unlikely to stabilize unless more drastic steps are taken.

"The problem is a lack of demand," he said. "With the lower price, Alcoa has got to try to bring its costs down. There is no way they can make money at 65-cent aluminum."

Alcoa said it will seek to lower costs for energy and raw materials, such as coke, caustic soda and aluminum fluoride.

Alcoa, which suspended its stock buyback program and non-critical capital projects in October, said it will build on earlier efforts to conserve cash.

The company said it expects capital expenditures of $1.8 billion in 2009, 50 percent lower than last year. Such spending includes about $750 million for the completion of a refinery and a bauxite mine in Brazil.

Shares of Alcoa fell about 4 percent in after-hours trade after rising 26 cents, or 2.2 percent, to close at $12.12 on Tuesday.


AP Manufacturing Writer Stephen Manning in Washington, D.C., contributed to this report.
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