Alcoa to Slash Spending, Cut 15,000 Jobs

The move raises the question as to whether other companies, which have instituted cost-cutting measures to conserve cash, will likewise find their efforts inadequate. Alcoa, which announced an earlier round of cost cutting this fall when demand for commodities and availability of credit began to decline, said the sustained economic downturn was forcing even more drastic moves.

"We will continue to monitor the dynamic market situation to ensure that we adjust capacity to meet any future changes in demand and seize new opportunities that emerge. These are extraordinary times requiring extraordinary actions," said Alcoa CEO Klaus Kleinfeld.

By year's end there will be 15,000 fewer workers at the company, roughly 14.5% of its current employees and contractors, Alcoa said. It also instituted widespread salary and hiring freezes. Capital expenditures will be reduced by 50% in 2009, and the company's aluminum smelting operation curtailments will be further reduced by another 135,000 tons to a total of 750,000 tons, representing about 18% of the company's production.

Alcoa said it would sell its electric systems business, automotive wheels business, global foil and transportation products business based in Europe.

The company said those businesses combined lost about $105 million in 2008 on revenue of $1.8 billion. Alcoa said there were "interested buyers" for all those businesses but would not offer a timetable on when it expected the sales to be completed. Once sold, the company said it expected to net about $100 million.

Alcoa said that all its cost reductions are expected to save the company $450 million on an annualized basis.

Aluminum prices , which hit highs earlier in 2008, have fallen since then, especially in recent weeks as consumption waned and stockpiles in China and Europe grew.

Aluminum consumption has been especially hard hit in the automotive and consumer foil sectors, -- businesses that Alcoa now wants to reduce its exposure to through asset sales.

Alcoa lost much of its luster in the recent commodity boom, failing to match the profit rise of other mining and metals companies, including rivals Rio Tinto Aluminum and UC Rusal.

Both of those companies have likewise announced major cuts, shuttering operations and selling downstream businesses such as operations in China. Alcoa's latest moves are an attempt to retool and position itself to both weather the downturn and emerge stronger financially when demand returns.

-- Robert Guy Matthews, The Wall Street Journal