Alcoa To Idle Production At 2 Italy Smelters, Cut 2,000 Jobs
DOW JONES NEWSWIRES
Alcoa Inc. (AA) said Thursday it will temporarily stop production at two
aluminum smelters in Italy - cutting about 2,000 direct and indirect jobs -
because of concerns about getting future power supply for the smelters at
competitive rates after a European Commission decision.
It expects a fourth-quarter pretax charge of between $300 million and $500
million related to the curtailment and the recovery actions likely to be taken
by the government for aid already given Alcoa. The charge will affect cash flow,
it said.
The company is appealing the EC ruling, in which the regulators barred Italian
electricity subsidies for the aluminum producer and ordered the Italian
government to recover aid already given to the company. Italy had given Alcoa -
which has about 63,000 employees - preferential electricity rates for its
smelters in Sardinia and Veneto between 2006 and 2010.
Alcoa said the tariff was in place for more than 10 years in Italy and had
been approved by the EC in 1995, the year Alcoa bought the operations. Alcoa
said it was designed to provide power to energy-intensive industries in line
with energy costs in other European Union countries.
President and Chief Executive Klaus Kleinfeld said the commission was "sending
a signal to investors and workers that heavy industry is no longer a priority."
He added, "The EC's decision, which was not based on a complaint by a competitor
or any third party, will effectively shut down Italian aluminum production and
make the European aluminum industry less competitive in the worldwide markets."
The commission, the E.U.'s regulatory arm, said the aid was given solely to
reduce Alcoa's operating costs and had no other justification. Under European
Union rules, state aid for companies is usually prohibited, unless a company is
helping boost employment in an impoverished region.
Alcoa said the two smelters, which have a combined capacity of 194,000 metric
tons of aluminum a year, aren't viable at current Italian power rates.
The wind-down at the smelters is expected to start immediately and seen ending
in the second half of next month, the company said.
It added the cutbacks in Italy will bring its total global smelting system
curtailments to about 24%.
Alcoa shares closed down 3.9% at $13.22 amid a broad market decline and
haven't traded after hours.
- By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; kerry.benn@
dowjones.com
(END) Dow Jones Newswires
11-19-091633ET
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