Alcoa to split up

Falling commodity prices and a glut of aluminum have forced the United States' biggest aluminum company, Alcoa, to separate the cyclical commodity business from its high-technology business.

Alcoa announced Monday it would become two independent, publicly traded companies, one focused on upstream mining and smelting and the other on manufacturing aluminum products to supply industries including aerospace and auto manufacturing.

Klaus Kleinfeld, Alcoa chairman and chief executive, said in a statement that the company now had two "strong value engines" that were ready to pursue "their own distinctive strategic directions."

"We are interested in creating value for our customers, for our shareholders, for our employees, and at this point this is the option we see that creates the biggest value," he added.

Kleinfeld will lead the downstream manufacturing company as chairman and CEO, and serve as chairman for the upstream Alcoa for its initial phase.

Supply glut amid weaker growth

While demand for Alcoa manufactured products for airplanes and cars has remained strong, the company has been pummeled by lower aluminum prices. Aluminum prices have dropped nearly 40 percent in the past four years, and 25 percent over the past 12 months.

For the second quarter, Alcoa reported a small rise in earnings to $140 million (125 million euros), weighed down by the fall in aluminum prices. The stock has fallen 42 percent this year alone.

After the separation, the new upstream company, which will retain the name Alcoa, will have five business units dealing with bauxite mining, alumina refining and aluminum production in 64 facilities worldwide. It will have a workforce of some 17,000.

The downstream manufacturing unit, to be named after the separation, will aim at fast-growing markets such as the aerospace industry, supplying rolled and engineering products for aircraft and jet engine manufacturing. The company will operate in 157 locations globally with 43,000 employees.

The plan, approved by the board of directors, was expected to be finalized in the second half of 2016, Alcoa said, and would be structured as a US tax-free transaction to Alcoa shareholders, who would own all outstanding shares of the two companies.

uhe/pad (Reuters, AFP, dpa)