[January 07, 2009]

Alcoa cuts in Blount County, Tenn., leave officials 'in shock'

(Knoxville News-Sentinel, The (TN) Via Acquire Media NewsEdge) Jan. 7--ALCOA -- Local government officials are "in shock" and wondering about the ripple effect of Alcoa Inc.'s decision to cut 450 jobs in Blount County as part of a global cost-cutting effort that includes a total of 13,500 positions, or 13 percent of Alcoa's worldwide work force.

The Pittsburgh-based manufacturer said Tuesday it is shutting down both smelting production lines in Blount County as part of an 18-percent reduction in annual primary aluminum output. That's a total drop in smelting output of 750,000 metric tons per year and is part of a multipronged strategy by which Alcoa aims to save $450 million per year. The company has about $30 billion in annual revenues.

The rigid packaging division in Blount County isn't affected, company spokesman Kevin Lowery said.

The 450 jobs are being cut in what Lowery called a "temporary curtailment" and represent almost a third of some 1,500 Alcoa jobs in Blount County. The cuts will occur by the end of the first quarter.

"As market conditions improve, we will look to restart that production," Lowery said.

Local officials were devastated by word of the cuts.

"It's going to have a heavy impact on everything across the county," Blount County Mayor Jerry Cunningham said.

He blamed the layoffs on both high utility rates charged by TVA and reduced demand in the aluminum market. He said the layoffs have "a ripple effect. It affects sales tax collections" and is "terrible news, particularly the impact on 450 families."

Mark Johnson, the Alcoa city manager, called the size of the layoff "unprecedented" and said, "It reflects how bad the economic times are." While it's difficult to gauge the financial effect on the city, he said, "People are not going to spend as much money, which will reflect negatively on sales tax (collections)."

The aluminum company buys "a considerable amount of water" from the city of Alcoa. "Water is a big-ticket item," Johnson said, so city revenues could be affected on that front as well.

Johnson said city officials are "in shock right now" and have gotten no indication from company officials how long the layoff might last.

Lowery said severance for salaried employees will be based on years of service and that the company will begin discussions with union representatives about hourly workers' compensation.

"It's important to note that this is one of many, many, many steps that the company is taking," Lowery said.

Other cost controls include:

--Cutting 1,700 contractor positions.

--Freezing salaries and hiring.

--Reducing 2009 capital expenditures by 50 percent, to $1.8 billion.

--Selling four "noncore downstream businesses:" Electrical and Electronic Systems; Global Foil; Cast Auto Wheels; and Transportation Products Europe. The four employ a total of 22,600 workers at 38 sites and had 2008 combined revenues of $1.8 billion and after-tax operating losses of about $105 million.

The company cited the global economic downturn in making Tuesday's announcement.

"Unfortunately there's an economic situation going on in the world where the price of aluminum has gone from about $3,300 in July to about $1,500 a ton today," Lowery said.

"That's a tough thing to have to go through, so you have a combination of economic conditions going on around the world, the overall cost position of the operations there (in Blount County), as well as just a variety of different market conditions," he continued. "We tried to put this off as much as we could. ... It is a difficult thing to do. We're going to treat everyone there with respect."

David Keim, continuous news editor for news and business, and contributor Bobby Wilson contributed to this report.

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