Alcoa reports wider loss, plans to cut 8,000 jobs
By Charles Sheehan Associated Press Writer
PITTSBURGH (AP) – Alcoa Inc. said it will cut 8,000 jobs this year as the aluminum maker reported a wider-than-expected fourth-quarter loss Wednesday.
For the quarter ended Dec. 31, the company lost $223 million, or 27 cents per share. Revenue slipped to $5.06 billion from $5.10 billion a year earlier.
The loss was worse than the 25 cents per share predicted by analysts surveyed by Thomson First Call and far wider than the year-ago loss of $142 million, or 17 cents per share.
The world’s largest aluminum producer said it will continue its aggressive cost-cutting program by reducing its global work force by about 6 percent. The company also said it had reviewed all of its businesses ranging from alumina – the stock used to make many aluminum products – to automotive and will spin off those that do not deliver “superior returns.”
The company had expected market losses in aerospace and other industries to flatten out, yet Alcoa’s sales continued to slide.
“Global manufacturing weakness has persisted longer than we anticipated,” said Alain Belda, Alcoa chairman and chief executive officer. “In particular, aerospace, industrial gas turbine and telecommunication markets remained soft, reinforcing the need to increase the scope of our cost savings.”
Pittsburgh-based Alcoa, which ended the year with 127,000 employees, said most of the job cuts would be in Europe and South America, but sales of underperforming businesses would include domestic interests. The company recorded a $95 million after-tax charge to restructure businesses in the aerospace, automotive and industrial gas turbine markets, and in U.S. smelting operations.
While the company would not release many details of specific actions it would take, Alcoa officials said one U.S. company that will go on the block is Kwaneer North America, an architectural aluminum building products company based in Norcross, Ga.
Alcoa, which was headed by former Treasury Secretary Paul O’Neill for 13 years before his appointment to the Cabinet two years ago, already had embarked on accelerated cost-cutting efforts throughout 2002 as shares fell by 36 percent. Alcoa reported annualized cost savings of $600 million, with a goal of cutting costs by $1 billion in 2003.
Wall Street had expected a weak quarter, but Wednesday’s report caught analysts by surprise.
“It’s a lot weaker than anyone expected,” said Stephen Bonnyman, an analyst with Bear Stearns. “The key themes that really stand out of this report are the special divisions. Their penetrations into these markets are much weaker than expected.”
Alcoa said it will continue to cut costs where it can.
“While the economy and the markets are still feeling their pains, we have things that are within our control and we’re not going to sit around and wait for things to get better,” said spokesman Kevin Lowery. “We’re going to take action and that’s what we’re doing here today.”
The company eliminated about 10,000 jobs last year, though with the purchase of Ivex Packaging and Fairchild Fasteners, it added about 8,000 new employees, Lowery said.
The 8,000 job cuts will be completed by the end of 2003, Lowery said.
Among the operations that will be sold off are specialty chemicals and packaging equipment in North America and automotive fasteners businesses and some fabricated operations in South America.
Those businesses generated about $1.3 billion in sales in 2002, the company said. Proceeds from the spinoffs will be used to reduce debt, company officials said.
The company reported a net income of $420 million in 2002, or 49 cents per share, compared with net income in 2001 of $908 million, or $1.05 per share.
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