Alcoa, Tennessee to cut 450 jobs, close South Plant

Globally, Alcoa Inc. will reduce workforce by 13,500

In a press release Jan. 6, from the Alcoa, Inc., home office in Pittsburgh, Pa., company officials announced a layoff of 13,500 (13 percent) of the global workforce plus 1,700 contract positions by the end of 2009.

Locally, Alcoa, Tennessee Operations will cut 450 jobs and close the South Plant, confirmed city of Alcoa City Manager Mark Johnson.

“It’s a bad news day,” Johnson said.

Johnson said the reason he was given for the corporate decision was that the global price for aluminum is considerably less than what it cost them to make it. “It has been for some time,” he said.

Johnson said he was notified today about the planned layoff but he didn’t know when the lay offs would be effective. “It will take them through March to actually shut all the systems down in the plant. The North Plant will continue as a separate division.”

The North Plant makes beverage can stock and Johnson said, “The market for that is still good.” For the processes at the South Plant, however, Johnson said, “We’re in a global market, and the price has just dropped down to the point where it doesn’t make sense for them to continue at this point,” he said.

Johnson said how the decision will specifically effect the City of Alcoa is hard to gauge because the 450 employees live all over the area.

“The real immediate impact would be in reduced spending and in the multiplier effect of their salaries going through our local economy,” he said. “That’s going to have an effect all over Blount County and neighboring counties as well. It’s not just isolated to Alcoa. We’re all part of the Blount County community and part of the Knoxville metropolitan area, and so it’s going to be felt all over. We’ll all share in this pain.”

Johnson said that sales taxes are decreasing and people are being more conservative with spending. “Our two major sources of revenue for Maryville and Alcoa are property taxes and sale taxes. Property tax won’t be affected immediately. The biggest concern right now is sales tax.”

Blount County Mayor Jerry Cunningham addressed the Blount County Commission during their monthly workshop about the situation at Alcoa, Inc. “I hate to be the bearer of bad news. I received a call about 3:30 p.m. that the plant is closing down two pot rooms. It’s a terrible situation,” Mayor Cunningham said.

The mayor said he asked if the move was permanent and was told that it was not, but that cutbacks corporate-wide would cost 13,000 jobs globally. “We’ve been hearing rumblings about this kind of thing,” he told commission.

Cunningham said a smelter in New York state was not idled, and the mayor said he asked why that plant wasn’t shut down instead. “In New York, they have a long running contract with a private utility. Our utility rate from TVA is not even competitive,” he said.

State Sen. Doug Overbey said he was on his way back from Nashville when he got a call today from a aluminum company representative who gave him the news. “It’s distressing for our community but even more for the 400 and some families who are affected. If there is any good news it is that this is a temporary condition,” he said. “I was assured it was only temporary and as soon as the economy improves, our pot lines will come back.”

Overbey said if there are any state benefits he wants to make sure these employees receive all the benefits to which they are entitled. “If my office can help them in anyway receive those benefits, I would be happy to do so,” he said.

The state senator said much has been made of how America is now part of a global economy. “What is happening is a part of that global economic condition,” he said. “In some ways the Aluminum Company of America has had lay offs or shuts down in many other plants. I think it’s a tribute to the workers in Blount County that they have kept it going this long. I think all of us need to work on improving the economic situation and getting the folks back to work just as soon as possible.”

U.S. Senator Lamar Alexander said he hoped the situation with Alcoa, Inc., would be temporary.

“Alcoa has been providing good jobs for East Tennesseans for most of a century," Sen. Alexander said. "Hopefully these are short-term decisions to help deal with the national economic downturn and Alcoa will still have a bright future in East Tennessee.”

Kevin Lowery, director of corporate communications for Alcoa, Inc., said the move was a temporary curtailment and a lot of different market conditions would have to change. “We always say we make a production change up and down strictly based on market conditions,” he said.

Different factors feed into market conditions such as the price of metal, customer demand, the price for electricity, the cost for raw materials, the overall cost associated with making the product in one place. “How does the facility operate in relation to other facilities across the world?” he said. “It is our hope we will be able to restart this operation quickly. That would be our ultimate goal.”

The South Plant processed ingot that the North Plant used in the Rigid Packaging business to create rolled can sheet for aluminum cans. Lowery said the North Plant will continue to get ingot from the recycling facility at the plant and will get other ingot from the Alcoa Global Trading desk in Knoxville.

Lowery said the decision made today is the most difficult part of business because it impacts people. “It always is the most difficult part. The only thing that helps us is the understanding that we do things with the goal of making the whole business stronger, and there’s a part of the business that gets impacted to make remainder of the business stronger,” he said. “It’s unfortunate this was among our highest cost operations in the world. When you’re trying to make it stronger for the rest of the company, unfortunately something has to give.”

Lowery said that the cost of electricity on average for everybody in the business makes up anywhere from a third to 40 percent cost of making aluminum. “If that cost is not globally competitive that puts you at a competitive disadvantage,” he said.

In a corporate release, Klaus, Kleinfeld, president and CEO of Alcoa, Inc., said, “These are extraordinary times, requiring speed and decisiveness to address the current economic downturn, and flexibility and foresight to be prepared for future uncertainties in our markets. We are taking a wide-ranging set of aggressive, but prudent, measures to ensure that Alcoa maintains its competitive lead in today’s challenging markets while also emerging even stronger when the economy recovers.”

In addition to the layoffs, the company announced the following measures:

Reducing smelting output 750,000 mtpy, or 18 percent of output

** Freezing salaries and hiring

** Selling four non-core downstream businesses

** Reducing capital expenses by 50 percent.

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