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Jan 7, 2009

Alcoa slashes 15,000 jobs

IN A further sign the global economy is in trouble, aluminium giant Alcoa is set to slash 15,000 jobs.

They will also cut production for the third time in as many months.

The aggressive cuts, which represent 13 per cent of Alcoa's workforce and 18 per cent of production, come less than a month after Rio Tinto said it would lay off 14,000 of its global workforce amid plunging demand for minerals.

"There have been a number of announced cutbacks to aluminium capacity and I would suspect there will be more to come," Commonwealth Bank commodities strategist David Moore said.

"I would not rule out the possibility of more production cutbacks in a number of metals."

Most of Alcoa's job cuts, comprising 13,500 of its own workforce and 1700 contractors, will come from its downstream markets in North America and Europe that serve the automotive and aerospace markets.

The company's US bauxite and alumina operations will take the next biggest hit.

No permanent jobs have been lost at Alcoa's operations in Western Australia and Victoria. However, the company said it would reduce contractors and consultants, impose salary freezes and capital reductions, restrict travel and minimise new hires.

There were no plans to reduce the Australian workforce at this stage, an Alcoa Australia spokesman said.

However, the cuts announced on Tuesday night are by no means final.

Alcoa chief executive Klaus Kleinfeld said the company would adjust capacity to meet any further changes in demand.

"These are extraordinary times, requiring extraordinary actions," he said.

Since June, about 4400 Australian mining jobs have been lost, and more are expected when Rio announces details of its 14,000 job cuts.

Rio has already put 630 workers at its Northparkes mine in NSW on notice and will tell them next week whether they have jobs or not.

A Rio spokesman said the company still did not have a timetable for announcing the cuts.

Alcoa said it would reduce annual aluminium production by a further 135,000 tonnes, bringing total cuts to 750,000 tonnes, or 18 per cent of capacity. Credit Suisse analyst David Gagliano said while Alcoa's cost savings were encouraging, more cuts were needed in the aluminium industry.

Another mining analyst said more local cuts were likely, and that BHP Billiton, which so far has not cut local production, would probably not be immune when contract prices for iron ore and coal were settled in coming months. "I think it is just starting and we will see it from everyone," he said.

"Bulk commodity prices still have to be adjusted, and large falls there are going to see everyone pulling their belts in."

Alcoa also indicated that its fourth-quarter earnings, due for release next week, would include charges of up to $US950 million ($1.32 billion).

The major restructuring, which will also include asset sales and a 50 per cent cut in capital expenditure for 2009, is expected to save the company $US450 million a year.

Alcoa is normally the first of the 30 Dow Jones Industrial Average companies to report, and its cuts could foreshadow many announcements, both here and abroad, of downgrades and cost cuts ahead of earnings releases.

So far, Alcoa's only cuts in Australia have been at Victoria's Portland smelter, where it has reduced production by 5 per cent and has shed between 18 and 20 contractor positions.

Shares in Alumina, which is Alcoa's 40 per cent partner in Alcoa World Alumina and Chemicals, were steady yesterday after chief financial officer Ken Dean said the only impact on the joint venture would be a slight production cut at US operations.

Source : Australia Business
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