Alcoa CEO believes auto stimulus, housing may help

Alcoa Inc. sees a glimmer of hope for a rebound in the global aluminum market, even though it expects demand will fall by about 7 percent this year, the aluminum producer's chief executive said Friday. Other than demand in China, which has been spurred by that nation's economic stimulus program, Alcoa CEO Klaus Kleinfeld told about 220 stockholders that demand for aluminum in the world's other regions remains down this year. Alcoa held its annual meeting yesterday at the Senator John Heinz Regional History Center in Pittsburgh's Strip District. Europe's economy remains distressed, but Kleinfeld said he hopes aluminum demand will rise with 10 countries offering "cash for clunkers" programs, giving auto owners money to turn in their old cars to buy new ones. China's increased need for aluminum might pull along some other Asian countries, Kleinfeld said. There appears to be some stability in the automotive markets and the residential housing sector has stabilized, although at lower levels than last year, Kleinfeld said. Both automotive and housing markets are important to Alcoa. The crucial element for the aluminum industry's recovery "is not so much demand, it's reducing supply," said Charles Bradford, a metals industry analyst with Bradford/Soleil Research in New York. While Alcoa has cut back on production, other aluminum producers have said they will close plants but have not, Bradford said. There is a real question, he said, on whether important aluminum markets, such as aerospace, can recover from the recession. "Things don't look promising now," Bradford said. Kleinfeld, who is completing his first year at the helm of Alcoa after taking over the CEO's post from Alain Belda in May 2008, pointed out that it's hard to recall that with all the bad news now, the aluminum business was doing very well "for three-fourths of 2008." Then, "all hell broke loose" ... and "it was almost like the bottom fell out of the market," he added. The impact of the recession on key aluminum markets such as autos, transportation, aerospace and construction was reflected in the company's first quarter loss of $479 million, or 59 cents a share, as revenues plunged 36 percent to $4.1 billion. Aluminum prices that had hovered around $3,000 a ton in July 2008, declined by 54 percent by the end of the year, Kleinfeld said. The price is hovering between $1,350 and $1,550 a ton, he noted. Alcoa has responded to the downturn by reducing production and cutting its global work force by 13 percent. It plans to cut expenditures this year by about $200 million and cut aluminum production costs by 30 percent from the third quarter of 2008. Kleinfeld assured area shareholders -- and employees -- that the company that was founded in Pittsburgh in 1888, remains committed to the Pittsburgh region. Although Alcoa moved its corporate headquarters to New York City in 2006, it still has about 2,000 employees in Western Pennsylvania -- at the company's corporate center on Pittsburgh's North Shore and at the Alcoa Technical Center in Upper Burrell. By comparison, only about 60 employees work at the company's Manhattan offices. "We would not be able to operate the company without the Pittsburgh presence," Kleinfeld said. Alcoa's stock closed yesterday at $10.01, up 16 cents, or 1.62 percent. The stock has been as high as $44.77 in the past 52 weeks.