Alcoa Update 1996 Annual Report
It all starts with dirt.
Alcoa at a Glance Financial and Operating Highlights
(dollars in millions, except share amounts)
The world’s leading producer 1996 1995 %change
of aluminum and alumina, Sales $13,061.0 $12,499.7 5
Alcoa serves customers in Income from operations* 721.0 1,024.3 (30)
the packaging, automotive, Net income* 514.9 790.5 (35)
aerospace, construction and
Per common share:
other markets with a variety
Net income 2.94 4.43 (34)
of fabricated and ﬁnished
Dividends paid 1.33 .90 48
products. The company is
Book value 25.54 24.89 3
organized into 21 business
Total assets 13,449.9 13,643.4 (1)
units, with 178 operating
Capital expenditures 995.7 887.1 12
locations in 28 countries.
Cash ﬂow from operations 1278.9 1,712.5 (25)
Alcoa’s mission is to be
the best aluminum company Return on average shareholders’ equity† 11.6% 18.5% (37)
in the world, setting world Debt as a percent of invested capital 22% 17% 29
standards in quality and Interest coverage ratio 8.6 11.3 (24)
creating value for customers,
Current assets / liabilities ratio 1.8 to 1 1.8 to 1 –
employees and shareholders
Shipments of aluminum products (000 metric tons) 2,841 2,582 10
through innovative technology
Number of shareholders 88,300 83,600 6
and operating expertise.
Average common shares outstanding (000) 174,334 178,018 (2)
Number of employees 76,800 72,000 7
* Includes special charges of 122.3 or 70 cents per common share, in 1996, and $10.1, or six cents
per common share, in 1995.
† Without the special charges, the return on equity was 14.4% in 1996 and 18.8% in 1995.
Contents By Geographic Area
Letter to Shareholders 1
Adding Value from the
Ground Up 4
Worldwide Operations 48
Business Units 51 15%
Trends in Major Markets 52 17%
Shareholder Information 56
Index 59 U.S.
The Alcoa/Audi Partnership Pacific
Distribution and Other
Alumina and Chemicals
Building and Construction
Market Trends covered on page 52
To Alcoa Shareholders
Earnings in 1996 totaled $514.9 million with revenues of $13.1 billion
and a return on equity of 11.6%. Before special charges, earnings were
$637 million for a return on equity of 14.4%.
Elsewhere in this report you will ﬁnd the ﬁnancial details for the year,
facts on product volumes, historical information and news items. My
“My purpose this
purpose this year is to give you, more than I usually do, an account of
year is to give
our leadership intentions and accomplishments.
of our leadership First, a general observation. Much of what we say about our business
intentions and philosophy you will ﬁnd in the majority of annual reports. All profess
to do well and to do good. The dividing line among companies is the
difference between professing and doing.
For example, all companies say, “People are our most important asset.”
The question is, what does that mean?
First Things First
In our case, respect for the individuals who work in Alcoa begins at the most fundamental level.
We believe that if an employee is injured and unable to work, the idea of being an “important asset”
is a meaningless sentiment.
From this logic, ten years ago we made safety our most important internal priority, announcing
the intent to achieve an injury-free workplace. The challenge was how to do it.
At the time, we had an enviable safety performance as compared with the average American
company. Our lost workday rate was 1⁄3 of the U.S. average. Many of our managers believed it was not
possible to do a lot better. They cited our “dangerous workplace,” dominated by heavy equipment
and electricity and hot metal. Others simply believed, “Accidents happen.” So one of our ﬁrst needs
was to convince the leaders of the company that better safety performance was possible.
We started this effort by sending our opinion leaders to visit DuPont factories and those of other
companies that had a better safety experience than we did, and we began to ask ourselves why.
Cause and Effect
A second need was to begin a systematic effort to produce better results. This meant beginning a
process of generating learning from our injury experience — looking for the common causes that were
associated with injuries, creating better performance expectations for supervisors and individual
employees, and eliminating excuses.
One such excuse is the misapplied idea from economic theory that perfect safety is unaffordable
because of the law of diminishing returns — that is, it would cost too much to deliver on the idea
that all employees should return home each night in the same good condition as when they came to
work in the morning.
There is more to this story, but to cut to the results — in each
of the last nine years we have improved our lost workday perfor-
mance as compared with the previous year. Our incidence rate as
compared with U.S. industry has moved from 1⁄3 the U.S. rate to
⁄10 for all of 1996 and, at the end of 1996, we were operating close
to 1⁄20 the U.S. rate. (Our rates are, of course, worldwide rates.)
Our safety performance is important in its own right, but at
Alcoa it has implications far beyond safety. In the process of
demonstrating that we have the ability to produce a team result
such as this — that is directly relevant to each employee — we
have developed and integrated the ideas and tools that are
necessary to superior achievement in all that we do: manufac-
turing, ﬁnance, logistics, environment.
Paul H. O’Neill We have made progress in all of these areas, but we are far from ﬁnished; and we will never be
through with our efforts to achieve and sustain zero injuries.
Chief Executive Ofﬁcer
At root, this is a profound change in culture, a transformation from old habits of settling for
the “inevitable” (accidents happen…costs go up…markets get glutted…strikes are a fact of life) to the
belief that a company can seize the initiative and shape its own future.
“Our safety perfor-
mance is important This emphasis on creating our own fate has changed us as a company. If you go any place in
in its own right, but Alcoa’s twenty-eight country universe you will ﬁnd safety is the ﬁrst internal commitment. And on
at Alcoa it has impli- this safety backbone we have been building excellence in all things we do.
cations far beyond
safety. In the process
…we have developed
Our focus on safety has been an important contributor to positive working relationships. Evidence of
and integrated the
this contribution is the landmark contract we signed in 1996 with more than 10,000 U.S. employees
ideas and tools that
are necessary to represented by the Steelworkers union.
superior achieve- This is the longest duration contract we know of — six years — which means all of us can
ment in all that we concentrate on producing great results for customers instead of suffering the usual twelve-month
do: manufacturing, productivity slump as we approach the end of the traditional three-year contract.
Importantly, this new contract was negotiated by the Business Unit Presidents who have to live
with the consequences, and it provides for a far-reaching partnership approach that can only succeed
with their direct and continuing engagement. We believe the next stage of achievement in workplace
relationships is an “evergreen” contract that leaves behind the outdated notion of hostility between
employees and employers.
The business unit concept which we implemented in 1991 has been a powerful force for aligning the
interests of the customer, Alcoa employees, and shareholders. It has clariﬁed responsibility and account-
ability and created a cadre of people who are charged with leading, not just managing, their businesses.
During the ﬁrst ﬁve years of using this structure, we gave heavy emphasis to the independence
of the 21 business units, and we will continue to do so. However, in 1996 we began the next stage of
our quest for world-leading performance, as the business and resource support units worked together
to identify $300 million (25%) of combined savings in administrative costs.
“This is a profound In this process the joint teams have developed or elaborated concepts of shared services and
change in culture, a centers of excellence which will save money while protecting or enhancing the quality and timeliness
transformation from of the work we do.
old habits of settling
for the “inevitable”
The Power of Information
To leverage our human, physical, and technological assets around the world, we have been working on
costs go up…markets
common data structures and seamless information connectivity. The early evidence of success in this
are a fact of life) to area is visible every quarter, as we are the ﬁrst major company to report earnings results for the previous
the belief that a com- three-month period. This notion of “seamlessness” in access to and availability of information is critical to
pany can seize the our ability to add value as we expand geographically, which we have been doing at an accelerated pace.
initiative and shape Projecting our technological and product competence into all of the important markets of the
its own future.”
world is a big part of our vision for Alcoa’s future.
In 1996 we completed the acquisition of Alumix, the largest Italian aluminum company; and we
added signiﬁcantly to our non-U.S. activities in Australia, Hungary, Norway and Brazil while completing
a major 30-year alumina supply contract with the China National Nonferrous Metals Industry
Corporation. We will continue this global thrust while looking for attractive opportunities to grow in
the United States as well.
Underpinning our ability to entertain growth opportunities is a conservative ﬁnancial structure,
which we will maintain.
Together these elements will ensure that your company, Alcoa, remains the deﬁnition of excellence in
Paul H. O’Neill
Chairman and Chief Executive Ofﬁcer
February 10, 1997
Adding Value, From the Ground Up
It all starts with dirt. This kind of dirt is called bauxite
ore. If you looked at a four-ton truckload of it and
someone asked, “What can you make out of that?” —
you would think, “Not much. Maybe the base for a
But from four tons of bauxite, it’s possible
to reﬁne about two tons of alumina —
a powdery oxide of aluminum. It’s not easy. The
technology is complex and the equipment is massive.
But Alcoa has reﬁned the reﬁning process to an art.
And from those two tons of alumina, we can smelt a
ton of aluminum. Smelting aluminum was the invention
that launched Alcoa 110 years ago.
A ton of aluminum is enough to make the cans for
over 60,000 Cokes, Pepsis or Buds. Enough to make
the spaceframes for seven Audi A8 luxury cars. Enough
to make 40,000 computer memory disks, capable of
storing all the books ever published.
All from a truckload of dirt. It’s almost magical. And we’re
proud to have the magicians who can pull it off.
Of course not everything Alcoa makes is aluminum. About $3.1
billion of our 1996 revenues came from nonaluminum products.
But the rest involves aluminum, and as one
of the owners of this amazing series of processes, you
might want to stop for a moment to review how it
all happens — how
Alcoa starts with
dirt and, step by step,
keeps on adding value
until we and our customers are
able to produce all of the modern
wonders made of aluminum.
are used to purify water
and to make refractory
and ﬁre retardant ﬁllers
for fabrics and plastics. 5
There is no other material quite like aluminum.
It is light in weight I highly resistant to corrosion
strong in alloys I an excellent conductor of electricity and heat
I an excellent reﬂector of heat and light I nonmagnetic
I nontoxic I outstanding in cryogenic properties
I highly workable I easy to assemble
I and naturally-good looking.
from cans, from cars, from anything —
leads in recycling. The most valuable material in the waste
stream, it pays its own way through the recycling loop.
And aluminum made from scrap requires only 5% of
the energy it takes to produce the same metal
Is Off and Running. The business unit is developing
It’s been a busy year for high-resolution graphics capa-
A-CMI, the partnership formed bility for the two-piece can
by Alcoa and CMI International, industry and state-of-the-art
Inc. of Michigan: printing technology
I The company built a through teaming efforts
new plant in Hawesville, with can industry cus-
Ky. There, A-CMI will tomers and printing
produce forged alu- industry suppliers.
components, including suspen- Prowler Stirs
New Labor Agreements. In
sion system control arms for Excitement.
May, Alcoa reached six-year
the all-activity vehicle that Chrysler’s Plymouth
labor agreements with the
Mercedes-Benz will build at its Prowler has riveted the
United Steelworkers of America
new U.S. plant in Alabama. attention of car enthusiasts
union and the Aluminum,
$400 million of
The control arms weigh up to and automotive media. A hot
Brick and Glass Workers
secured export notes,
11 pounds and will consume rod with an attitude — harken-
International Union. The com-
NewsBriefs’96 representing the largest-ever,
some 2.5 million pounds of ing back to the classic street
pany and unions also agreed to
longest-term, and most aggres-
metal a year. rods — the two-seat roadster is
an unprecedented partnership
I A-CMI announced it will pro- sively priced transaction of its
providing that Alcoa and the
kind for a Brazilian corporation.
duce a ﬁrst-of-its-kind alu-
unions work cooperatively on
The issue carries a 7.50%
minum undercarriage cross-
coupon, a 12-year ﬁnal maturi-
member for the redesigned
ty, and an average life of 8.1
1997 Corvette sports car. The
years. It was priced at only 140
Corvette will be the ﬁrst car in
basis points over the U.S.
North America to use both
objectives and shareholder and
Treasury bond due November
front and rear aluminum
union interests. This contract
2004. The notes were rated BBB
crossmembers. These compo-
covers approximately 10,000
by Standard & Poor’s as well as
nents will also be produced
employees in 11 locations. On
by Duff & Phelps.
September 30, following a
I In 1996 A-CMI broke ground
three-week strike, Alcoa and the
High-Tech Designs on Can
for its ﬁrst plant outside North
United Auto Workers union rati-
Sheet. During 1996, the Alcoa
America, in Lista, Norway.
ﬁed a new ﬁve-year agreement
Packaging Equipment business
Called A-CMI Scandinavian nearing production and will
covering 1,100 employees of
unit designed and manufac-
Casting Center ANS, the facility appear in dealer showrooms by
the company’s Forged Products
tured a registered embossing
will produce cast aluminum late spring. Already, Plymouth
business in Cleveland, Ohio.
machine for a major customer
parts for the European auto- has received well over 100,000
and developed a process of
motive industry. inquiries from interested car
printing photographic images buyers through auto shows,
on two-piece aluminum cans. telephone calls, letters, and
Internet activity on the
Plymouth Web site. The
Prowler’s aluminum body and
closure panels are made from
Alcoa sheet and extrusions and
are attached to an aluminum
frame manufactured at Alcoa’s
new Northwood, Ohio plant.
New Headquarters Going Up.
Construction is under way for
Alcoa’s new corporate center
on Pittsburgh’s North Shore.
Foundation and garage are
complete. By late spring, the
main structure will be in place
and work will be starting to
create a riverfront park facing
downtown Pittsburgh. Antici-
pated completion date of the
six-story building is June 1998.
Three years ago, aircraft build rates were stuck in a downcycle, well off
their 1991 peaks. Writing in Alcoa’s 1993 annual report, L. Patrick Hassey,
Old Headquarters Recycled.
Alcoa has offered its present president of Aerospace/Commercial Rolled Products, forecast that airplane
deliveries would be picking up starting in 1996 and strengthening still
building in Pittsburgh to the
further over the next several years. He also noted a longer term growth
community, as a center for
trend in revenue passenger miles, averaging 5% to 6% a year.
So far, the forecasts are proving, if anything, conservative. Build rates are
on course for a 44% increase in 1997 and further gains next year. In the
meantime, having anticipated the turnaround, Alcoa’s aerospace business
unit has dramatically expanded heat-treating capacity for sheet and plate.
Ready for the Turnaround
I In April of 1996, Davenport (Iowa) Works started up the largest vertical
heat-treating furnace in North America, tripling the plant’s capacity for
wide fuselage applications.
I A new horizontal plate heat-treating furnace will begin production next
month, raising the plant’s aerospace heat-treating capacity by 50% and total
heat-treated plate capacity by 30%.
I Hassey characterizes this $75 million expansion as giving Alcoa’s aerospace
customers “the most sophisticated, comprehensive heat-treat facilities and
economic development. The
44-year-old landmark will the broadest capabilities in the world.”
house government, private, and
I Also in 1996, a fuselage sheet polishing and processing center was opened
academic agencies involved in
in Hutchinson, Kansas, offering aerospace customers just-in-time, cut-to-
all aspects of regional planning
size, and electronic interface capabilities on a 24-hour basis.
Alcoa Scientists Help
All Clear at Vancouver. The $600 a month in cost savings
Environmental Protection because they last longer. For
Agency (EPA) deleted the Alcoa additional savings and cleaner
Vancouver Potliner Superfund gloves, team members decided
site from the National Priorities to wash the gloves in-house
List, which identiﬁes the most instead of sending them out
serious hazardous waste sites. for cleaning.
The EPA and Washington state
Department of Ecology (DOE)
said the Alcoa site was assigned
“No Further Action Required”
status. This de-listing clears the
way for redevelopment of some
prime industrial property. An
EPA ofﬁcial said, “Cleanup work
at Vancouver was handled
entirely by Alcoa, with over-
sight by the DOE. We commend
Alcoa’s job of cleaning this site.”
Amelia Earhart was a military nurse during World War I and
a social worker for six years after the war. And then, over the
objections of her family, she learned to ﬂy.
Mining and Environment.
Newspapers dubbed her “Lady Lindy” when she made a solo
Alcoa of Australia won special
crossing of the Atlantic in 1932. Five years later, accompanied
recognition for a computer-
by Lt. Comdr. Fred Noonan, she began a round-the-world trip
based system that integrates
in a twin-engine Lockheed Electra. After completing two-thirds
mining with environmental
of the journey, the plane vanished somewhere near Howland
management. Their Geological
Island in the South Paciﬁc.
Information System (GIS) helps
engineers and scientists to pro-
Still a Mystery
duce accurate mine plans that
consider biological diversity, Thirty-ﬁve books, ﬁve ﬁlms, and uncounted articles have
land use value, and water qual- speculated about where and how Amelia’s plane went down.
ity. The system also safeguards Now, investigator Richard Gillespie and 14 others from
against the spread of dieback The International Group for Historic Aircraft Recovery —
disease, a fun- along with a PBS ﬁlm crew — are searching an uninhabited
gal infestation atoll called Nikumaroro Island in the Phoenix group, 2,000
that attacks a miles from Honolulu.
Cut Costs, Not Hands. A safety plants in the The Right Kind of Metal
project team chose Kevlar jarrah forest,
Gillespie has found aluminum fragments there on three
gloves for the Slit and Pack including the
previous trips. Recently he brought several of those pieces to
Department at Tennessee jarrah trees themselves.
scientists at Alcoa Technical Center, asking if they could
Operations to help eliminate Development of GIS earned
identify the type of metal — and whether it could have been
the hand cuts that sometime the 1996 Minerals Operations
part of the plane.
occur when using cotton Sector Award from the Western
Results of their tests: the specimens appear to be Alcoa
gloves. Though they cost ﬁve Australia Department of
Alclad aluminum, the same type of metal used in construc-
times more than cotton, the Minerals and Energy.
tion of the Electra in the 1930s. Stay tuned.
Kevlar gloves are generating
GE Picks Foundation uses the Malcolm A Safer Workplace. Liberty
Alcoa Sheet Baldridge Quality Award crite- Mutual Insurance Company
Product. Alcoa ria for its audit process. The presented its Gold Award to
aluminum will be award recognizes that Poços de the Stuarts Draft, Va., facility
used in the exterior Caldas attained world’s-best of Alcoa Building Products.
door panels of General standards in leadership, man- The citation recognizes the
Electric’s new dishwash- agement information systems, achievement of two million
ers. The differentiated 3004 strategic planning, human work hours with an injury
H26 product from Aerospace/ resources management, process rate less than one-half the
Commercial Rolled Products management, focus on cus- construction industry average.
was named by Chief Information
was chosen over powder-coated tomer satisfaction, and business The Gold Award is the highest
Ofﬁcer (CIO) magazine to its CIO-
steel for this application based results. Brazilian President form of recognition Liberty
100 list for global expertise and
on superior aesthetics, weight Fernando Henrique Cardoso Mutual awards to its policy-
leadership in 1996. Focus of the
savings, equivalent dent resis- presented the award to Alcoa holders in the area of loss
award was on the role of infor-
tance, and cost savings. GE esti- Aluminio on November 20, 1996. prevention.
mation technology in transform-
mates sales of two million units
ing organizations into single
per year, resulting in more than
global entities. Voting was in
ﬁve million pounds per year of
two rounds. In the ﬁrst, judges
new business for Alcoa.
nominated 250 organizations
with reputations for excellence
Standards for Education. At
in multinational businesses. In
the request of Pennsylvania
the second, judges evaluated
Governor Tom Ridge, Alcoa
each as a global leader, weighing
Chairman Paul O’Neill headed
the business and information
a commission empaneled to
technology practices contribut-
develop statewide academic
ing to success.
standards. In three months, the
commission drafted public
school standards for math, sci-
Recognizing a strong linkage
ence, reading and writing.
between environmental, health
and safety performance, Alcoa
Brazil’s Best. The Poços de
has adopted a single value —
Caldas plant of Alcoa Aluminio
along with related policies and
won the Brazilian National
principles — covering all three
Welcome to Safety Town. The No Exceptions. In early 1996,
issues. The new EHS value
Brazil’s President Cardoso (r)
city of Fort Meade, Fla., home to Alcoans at an industrial chemi-
states: “We will work safely in a with Aluminio’s Fausto Moreira
an Alcoa industrial chemicals cals plant asked a ceramic
manner that promotes the
facility, and the Alcoa chemicals customer to improve
health and well-being of the
Foundation collaborated to safety practices in loading and
individual and the environ-
create Safety Town, a program transport. When no action was
ment.” In announcing the
designed to teach children the taken, Alcoans refused to load
change, Chairman Paul O’Neill
fundamentals of trafﬁc safety the company’s trucks until safe
reafﬁrmed Alcoa’s commitment
while walking or riding bicycles practices were adopted. The
to its value structure. “When
around the small city. customer took the business to a
that is correct,” he said, “every-
competitor. Recently, the same
thing else will follow.” He added
customer returned to Alcoa
that the uniﬁed EHS value is
Quality Award — the nation’s with an order — and new safety
also in keeping with the effort
highest honor for industry. The protocols for handling and
to simplify multiple processes
Brazilian National Quality transporting the chemicals.
Aluminio’s Home Turf
Brazil’s Economy Shows Hopeful Signs
The old stereotype, in the words of a 1940s song, Among Aluminio’s major markets, prospects
was, “They’ve got an awful lot of coffee in Brazil.” For appear strong in ﬂat-rolled products — because rising
most of the time since then, the image has been that food production expands the use of packaging foils —
they’ve had an awful lot of inﬂation. and in extrusions, which beneﬁt from gains in con-
Now, the nation where Alcoa Aluminio does 90% of struction activity.
its business has become a diversiﬁed, developing econ- As for beverage packaging, it’s weather rather
omy — and its inﬂation rate just dipped into single- than the economy that impacts consumption. “A rainy
digit ﬁgures. GDP growth, estimated at 3% for 1996, was month,” Moreira sighs, “can reduce beverage sales
nearly double that rate in the fourth quarter. by 30%.”
“That’s the good news,” said Fausto Moreira,
Rising Real Income
Aluminio’s president. “The news we’re still waiting for is
the passage of economic reforms in the Congress.” As inﬂation has declined, Brazilian workers have seen
their incomes rise by 64% in nominal terms — 30% in
Cautious Optimism real terms — over the past two years.
But Moreira is basically hopeful. The inﬂation rate This, too, provides economic stimulus, but it also
for 1996 was under 10%, and the prevailing forecast means rising labor costs for the company. To meet the
for 1997 is 7%. Lower inﬂation foreshadows lower challenge, Alcoa Aluminio has pushed hard for new
interest rates (now around 16% for commercial and efﬁciencies, scoring gains in productivity of approxi-
industrial borrowers) and restoration of credit to mately 30% in ﬂat-rolled products and 40% in extru-
ﬁnance consumption. sions over the same period.
Scoring in Lacrosse. High tech- equipment, these materials take transmission component order Crown Victoria, and Plymouth
nology has come to the ancient the form of extruded, tubular, for Europe in 4032 product. It Prowler. Production is expected
game of lacrosse. STX Lacrosse wire, rod and bar products from represents new business of to begin in late 1997.
of Baltimore is producing high- Alcoa’s Engineered Products 50,000 pounds per year.
performance lacrosse sticks business unit. These help to A Boost for Aircraft Plate. Alcoa
using Alcoa’s patented alloys, make the Olympic equipment Hold the Phone. When Alcoa- and AMI, an Alcoa distributor,
CU31 and C405 aluminum. The light, strong, and durable. Alcoa Köfém installed a new tele- were successful in extending
oldest organized game in North customers use the alloys to phone switchboard system in and expanding a cut-to-size
America, lacrosse was played by make archery equipment, base- its ofﬁces in Hungary, the old plate program at Boeing,
the Six Nations of the Iroquois ball and softball bats, mountain equipment was still workable. Wichita. This $84 million con-
long before Columbus landed. bikes, Rather than scrap it, Köfém tract will support increased
Currently, there are more than discuses, Alcoans gave the equipment to metal requirements for the
250,000 registered lacrosse spring div- Viktoria Fund, an organization Boeing 737 and 747 programs
players in the U.S. Their sticks ing boards, that helps the disabled in the over the next three years.
average half a pound in weight horseshoes, Székesfehérvár area, where
and consume roughly 300,000 gun sights, Alcoa-Köfém is located. The
pounds of aluminum annually. and javelins. telephone system has now
By designing the handles to Alcoa been installed in a home for
take advantage of Alcoa’s also was a sponsor of the handicapped people.
patented alloys, manufacturers Volvo/Cannondale mountain
have been able to reduce weight bike racing team at the Super Service for Carmakers.
while increasing strength, Olympics. Alison Sydor, riding Alcoa’s Aerospace/Commercial
longevity, and performance. for Canada on an Alcoa Alcalyte Rolled Products business unit
Cannondale CAAD3™ front is building a $48 million auto-
suspension F3000 sheet facility in Danville, Ill.,
mountain bike, pedaled including heat-treating and
her way to a Silver ﬁnishing equipment. The new
Medal in the ﬁrst-ever plant is designed to provide
Women’s Olympic automotive customers with Getting Kids to Read. Alcoa’s
Mountain new levels of responsive ser- Davenport (Iowa) Works spon-
Bike sored “Reading Adventures in
Race. the Park,” a day designed to
encourage reading for children
and their families. More than
2,000 residents attended, and
500 books were distributed to
children. Reading Adventures is
tied in with Alcoa’s sponsorship
of Newspapers in Education in
partnership with the Quad City
Gold, Silver and Aluminum. Inroads in France. Alcoa Times, Davenport’s leading
From bats to bikes, diving received its ﬁrst production newspaper. In this program,
boards and javelins, Alcoa’s order from Ford-Bordeaux for a Alcoa will supply more than
Alcalyte™ aluminum alloys had patented 4032 alloy product. 25,000 newspapers to area
a ﬁeld day at the 1996 Summer Supplied as bar stock from vice, supported by customer- classrooms during the 1996-97
Olympics in Atlanta. Alcalyte is Massena, this material will be driven information technology. school year.
derived from a series of alloys machined to form a sleeve for It will supply aluminum sheet
developed by Alcoa for the aero- the transmission of the Ford products for such models as
space industry. For sporting Explorer. This is Alcoa’s ﬁrst the Ford F-150 truck, Ford
Automotive Wiring. Alcoa contract with the Ford luxury region. Starting in late 1997,
Fujikura Ltd. (AFL) was selected car group in 1996 when it was Alcoa will begin production of
by Ford Motor as the full-service awarded an order to supply the closures at an order fulﬁllment
electrical system supplier for aluminum wheels for the 1998 center in Lubuchany, near
the 1997 Expedition, which will Ford Lincoln Continental. Moscow.
replace the Bronco as Ford’s Separately, the ﬁrst Alcoa after-
full-size sports utility vehicle. market auto wheel was sold in Packaging Units Join Forces.
Customer. Alcoa Wheel
AFL is also a major supplier for Japan when WEDS, the largest The capping equipment and
Products International, a part
the 1999 Subaru Legacy, provid- aftermarket wheel company in bottle control business of Alcoa
of Alcoa’s Forged Products busi-
ing over one-half of the electri- Japan, began purchasing forged Closure Systems International
ness unit, was the recipient of
cal distribution system and wheels for Japanese 4x4 sports (CSI) will relocate to Alcoa
the Paccar Certiﬁed Supplier
incorporating design ideas that utility vehicles. Packaging Equipment’s (APE)
Award, in recognition of
will lower system costs and facility in Randolph, New York.
achievement in design,
improve reliability. The alliance is expected to pro-
vide superior value for cus-
Alcoa Rates ‘Most Admired.’ tomers of both units. It lever-
turing, and technical
In Fortune magazine’s just- ages CSI’s application
support. Paccar, a
completed survey, Alcoa was expertise and knowl-
maker of quality
rated the most admired edge of customer
heavy-duty trucks, is
company in the Metals category. requirements
Wheel Products’ largest
Criteria include innovation, with APE’s
customer for commercial
ﬁnancial soundness, caliber extensive equip-
of management, and value to ment design and
investors over the long term. manufacturing
Forged Wheels: Ups and
Some 13,000 senior execu- capabilities. The
Downs. Alcoa Forged
tives, directors, and analysts Indianapolis-Lynhurst facili-
Products’ wheel business
ranked companies in their ty was closed, and machine
shipped over a million alu-
own industries. assembly in Richmond, Ind.,
minum truck wheels in 1996
has been phased out.
for the second year in a row,
Soest Starts Work for Mercedes. but 1996 shipments were 10.6%
At the Soest, Germany plant, Shaping the Organization. A
lower than in 1995. It was the
Alcoa began limited production number of salaried employees
ﬁrst yearly decline since 1991,
on the front crush module for at 11 U.S. locations accepted a
following four years of growth
the new Mercedes-Benz A-Class voluntary separation offer
averaging 30% a year. The prob-
car. The crush module is the made by the company last
lem: a 20% decline in Class 8
front-end structure of the car, an summer. The offer was part of
or heavy-duty truck build rates.
assembly of 11 aluminum com- Alcoa’s goal to reduce world-
In auto wheels, shipments were
ponents. Alcoa Automotive wide administrative costs by
close to 800,000. This is a 38%
Structures, which designed and Closures in Russia. Alcoa $300 million, or 25%. About 13%
drop from 1995 levels, due to
engineered this assembly under Closures Systems International of eligible employees accepted
the end of the Ford F-150 wheel
contract with Mercedes-Benz, is Europe now supplies plastic the program, which included a
program. Shipping levels in
now manufacturing it using closures to about 85% of all severance payment of two
1997 are expected to approach
robotic welding. This is the sec- Coca-Cola and Pepsi-Cola bot- weeks’ pay for each year of
1.4 million pieces, with several
ond major aluminum body tlers in Russia. Counting all service and pension payments
new Chrysler light truck pro-
structure program at Soest — brands of soft drinks, Alcoa based on age and service.
grams under way.
the ﬁrst being spaceframe com- holds almost half of the
ponents for the Audi A8 — and it Russian market for closures on
Two Firsts in Auto Wheels.
moves Alcoa into the secondary plastic soft drink bottles and
Alcoa Wheel Products
structure business in Europe. leads the market in the CIS
International received its ﬁrst
of the aluminum can’s conve-
nience, ability to keep products
fresher, and unrivaled recy-
New Consumer Package. Alcoa
Aluminio has developed a spe-
cial package — a rectangular
one-liter plastic bottle and
customized plastic closure — ner with the State University of
for CPC Company, the large New York at Buffalo. The award
Alumar Celebrates the
distributor of Mazola corn oil recognizes Alcoa’s leading edge
Environment. Alcoa Aluminio’s
in the Brazilian market. The research in effective treatment
Alumar reﬁnery and smelter
bottle’s unusual shape was of PCB contamination through
complex at São Luis, Brazil has
designed not only for market
Beverage Cans Take to TV. the use of biological processes.
opened an environmental
appeal but also for functional
Television advertising co-spon- park with 4,500 acres of native
reasons. Its rectangular cross
sored by Alcoa and other forest and more than 200
section improves rigidity and
aluminum companies through species of ﬂora, insects, birds
allows more compact stacking,
the U.S. Aluminum Association and animals. The ﬁrst park in
for efﬁcient transportation and
promoted the advantages of the Maranhão region to be built
display. The closure, a ﬂip-top
aluminum beverage cans inside a plant site, this environ-
version, was designed for oil
over other packages. The cam- mental center is open to
ﬂow control and drop control
paign — “You Get More Out of employees and their families,
a Can” — reminds consumers students, scientists, and the
community. There are two
Progress Report buildings for ecological infor-
mation and activities, an
How Aluminum amphitheater, accommoda-
tions for scientists, a nursery,
Cuts Auto Emissions and composting and earth-
worm areas. Two educational
‘Paws to Recycle.’ Alcoa, along
paths through the native forest
Alcoa’s push toward the age of the aluminum car is a drive for
with Friskies PetCare and the
and its ecosystems are the
growth in an enormous market. And it’s more than that.
American Humane Association,
park’s main attraction. Alumar
By designing with aluminum, carmakers reduce the weight
sponsored the third annual
produces 1.3 million mt of
of their vehicles. Lighter cars burn less fuel. And that means
“Paws to Recycle” campaign in
alumina and 362,000 mt of
lower emissions — less carbon dioxide, nitrogen compounds,
1996. This program rewards the
sulfuric acid, and particulates coming from the tailpipe.
used aluminum beverage can
For the 1996 model year, new cars and trucks built in North
recycling efforts of local animal
Environmental Research. The
America used about 3.6 billion pounds of aluminum. Resulting
shelters with cash prizes and
U.S. Department of Energy has
reductions in vehicle weight will save enough fuel over the life
free pet food. In the ﬁrst three
awarded Alcoa a three-year,
of these vehicles to eliminate 50 billion pounds of auto-related
years of the collection drive,
$440,300 contract to study soil
emissions. For the 1997 model year, increased aluminum
animal shelters in 46 states
remediation. Focus of the study
usage in cars will mean even greater reductions in emissions.
raised more than a million
will be naturally occurring
If the trend to aluminum continues — if, for example, all of
dollars in operating funds and
processes that biodegrade PCBs
the world’s ﬂeet of 450 million cars were eventually to shed
recycled over three million
in soils, sludges, and sedi-
20% of their weight through aluminum-intensive design — the
pounds of aluminum cans.
ments — and ways to accelerate
world could run 55 million more cars without adding to fuel
these processes. Alcoa will part-
consumption or emissions.
The Alumina Business
Major Contract in China Fits Acquisition in Brazil. In March
of 1996, Alcoa Aluminio pur-
Long-Term Strategy chased Alcan’s soft-alloy extru-
sion and distribution business
in Brazil, adding a nominal pro-
In late 1996, Alcoa World Alumina and Chemicals (AWAC) surprised
duction capacity of some
the industry by announcing a 30-year contract with
60,000 mt per year. The acquisi-
the government-owned aluminum company in China. tion represented a one-time,
The agreement covers the purchase of 400,000 metric cost-effective opportunity to
consolidate Aluminio’s leading
tons (mt) of alumina a year by China National
position in extrusions for the
Nonferrous Metals Industry Corporation (CNNC). The
Brazilian market. Eight months
latter will pay an advance lump-sum payment of
after the purchase, one of the
$240 million to AWAC related to the agreement and plants involved received ISO
per-ton payments as shipments are made. CNNC also certiﬁcation, and another
has the option to increase its alumina purchases. earned a three-year renewal of
its ISO 9002 certiﬁcation.
AWAC is a global alliance between Alcoa and
WMC Limited. It’s the world’s leading alumina producer,
Sinval Lizardo making
currently shipping some 10.6 million mt per year.
Nine-tenths of that is sold to aluminum smelters, some
in Alcoa but a majority to third parties.
An Important Step
Commenting on the contract in China, Alcoa World
Alumina President Robert F. Slagle said, “This new
relationship with CNNC represents an important step
for AWAC in growing our global business and conﬁrms
our commitment to the Chinese alumina market
and to CNNC.”
He said the contract is consistent with AWAC’s
strategy of selling most of its alumina under term
contracts. These minimize the exposure of buyer
and seller alike to the sometimes severe price French Connections. Alcoa
volatility of the spot market. Aluminio and Alcatel of France
formed a joint venture to
Responding to Demand manufacture and sell telecom-
munication cables and related
In addition to taking the long view, the strategy calls for making production
accessories in South America.
decisions based on market demand. AWAC curtailed 350,000 mt of production
The venture, called Alcatel
in 1996 and has additional capacity on the sidelines in St. Croix, Brazil, and
Cabos Brazil, is owned 60% by
Point Comfort, Texas. Alcatel and 40% by Alcoa
As aluminum production grows worldwide — as it’s growing now in Aluminio. It will provide a
complete line of ﬁber-optic and
China — AWAC will be able to activate additional supplies of smelter-grade
alumina and, in fact, has plans for further expansion of reﬁning capacity
cables from a manufacturing
when the demand emerges.
facility in São Paulo.
aluminum conference, Schultz two safety problems: it cuts and WMC. The chairman is
said, “Every 10% reduction in down on dusting problems and Roger A. G. Vines, AofA manag-
weight brings about a 7% gain incidents of back strain from ing director. Other members
in fuel economy and even handling bags. are H. M. Morgan, managing
greater reductions in emis- director, WMC; D. M. Morely,
sions. Alcoa’s goal and the Australia’s New Board. Alcoa director of ﬁnance, WMC; J. M.
goal of the entire aluminum of Australia (AofA) has Sibly, executive director–
industry is to lightweight as restructured its board of direc- Western Australia Operations,
quickly and efﬁciently as tors to reﬂect the formation in AofA; and Phil Spry-Bailey,
One Less Pollutant. Alcoa possible the world’s entire 1995 of Alcoa World Alumina executive director–ﬁnance and
Fujikura’s Spartanburg, S.C., automotive ﬂeet.” and Chemicals (AWAC). The administration, AofA.
was recognized by the EPA for Acuna Honors Alcoa. The city
its 33/50 pollution prevention of Acuna, Mexico, awarded
efforts. The 33/50 initiative Alcoa Fujikura Ltd. the Manuel
began in 1990, with the EPA Acuna sculpture, ﬁrst in a
asking U.S. industries to reduce series of annual awards. This
the release of 17 chemicals citation is presented to the
33% by 1992 and 50% by 1995. company, organization, or indi-
Spartanburg eliminated vidual whose actions and
trichloroethylene as a cleaning involvement have made a sig-
solution and was honored at niﬁcant positive impact on the
the EPA’s national conference community. Manuel Acuna was
called “Putting Pollution the famed Mexican poet for
Prevention Into Action.” whom the city was named.
Truck Bodies for Eastern Build a Better Container.
Europe. In 1996 Alcoa-Köfém Alcoa Technical Center and
began delivery of its ﬁrst alu- the Aerospace/Commercial
Samuel William de Sales installs an AFL wire harness.
minum truck bodies to major Rolled Products business unit,
beverage companies in Russia in partnership with two cus- world’s leading alumina pro- Wire Harnesses for Ford. Ford
and Poland — nearly 100 truck tomers, have developed a dry ducer, AWAC is 60% owned by Motor selected Alcoa Fujikura
bodies delivered in a three- bulk intermodal container Alcoa and 40% by WMC Limited. Ltd. (AFL) of Brazil to provide the
month period. An additional made of aluminum. The pro- Its strategic and policy direction electrical distribution systems,
675 truck bodies were ordered ject was completed in 90 days. is determined by a ﬁve-mem- or wire harnesses, for the new
by beverage companies in This container replaces dry ber Strategic Council including Ford Fiesta
Hungary and Israel, for delivery bulk bags, which are used once representatives of both com- being built
in early 1997. Total value of or twice, then discarded to a panies. In this context, respon- in that
these orders: $17 million. landﬁll. The aluminum con- sibilities of the board of AofA country.
tainer can be used for decades, will be carried out by ofﬁcers AFL is pro-
Leaner, Cleaner Cars. “Ten then recycled into a new directly involved in managing ducing the
percent of the cars and light container. Several other Alcoa the alumina business, under wiring sys-
trucks produced in North business units are interested the direction of the Strategic tems at its
America in 1996 have at least in using the new shipper Council. Chairman Sir Arvi new Itajubá plant. The plant is
one aluminum outer body because it offers the lowest- Parbo and directors Sir also manufacturing wire har-
panel,” reports Dick Schultz, cost and most environment- Laurence Muir, Adrienne nesses for the new KA passen-
president of Alcoa Automotive friendly method of moving Clarke, and M. J. Phillips have ger auto and will soon begin
Structures – North America dry products around the retired. The new board is com- production for the Fiesta pick-
and Asia. Speaking at an world. It also addresses posed of executives of AofA up truck.
Audi A8 Is a Smash Hit
with U.S. Auto Editors
Already a major success in Europe,
the Audi A8 — the world’s ﬁrst
all-aluminum spaceframe pro-
duction car — entered American
showrooms in October to near-
unanimous acclaim from automo-
tive writers across the country.
Audi and Alcoa collaborated to
develop the spaceframe that
contributes to the extraordinary
ride, handling, and passenger
safety of the A8. Alcoa produces
spaceframe components for the
A8 in Soest, Germany.
I Car & Driver “…It will be celebrated as a milestone I Road & Track “…The Audi Space Frame is 40 per-
in automotive technology decades from now.” cent sturdier than conventional unit-body structures.
Credit here goes to the chassis engineers, who
I Motor Trend “The heart of the A8’s design is its
worked side-by-side with Alcoa…”
aluminum space frame, a masterpiece of structural
I Motor Trend “Aluminum: Considerably lighter
engineering that was developed in conjunction with
aluminum supergod Alcoa.” than steel…the earth-friendly recyclable material
that can be remolded into something as stunning
I Autoweek “METALLURGICAL MARVEL…All that alu-
as the framework, bodyshell, engine componentry,
minum lightens the load so the engine can propel
and even suspension parts of a fabulous luxo-sport
this sleek package…from 0 to 60 mph in less than
sedan. Meet the new king of the alloys: the high-
tech Audi A8.”
I Cleveland Plain Dealer “The Audi A8 is challenging
I Fort Worth Star-Telegram “Audi has developed a line
traditional luxury-car gods…with the highest-tech
of cars for the latter ’90s that is among the best on
luxury car ever sold by Audi — or perhaps anyone
I Chicago Tribune “The 1997 Audi A8 rides and
I The New York Times “An aluminum sculpture on
handles like a charm…and comes with lightweight
wheels, the A8…is a technological tour de force.
aluminum frame and body panels to keep poundage
An innovative space frame borrows from aerospace
down while offering rust-free peace of mind.”
design and relies on 40 new patents and 7 new
I The Washington Times “All the major break-
throughs…made their debuts on premium-priced
I Cincinnati Enquirer “Audi A8 employs a revolutionary
automobiles. This was proven once again when
aluminum space frame…that delivers extraordinary
Audi introduced its groundbreaking…aluminum
weight savings with best-in-class safety, performance,
Cast Wheels Rolling Out. Innovation Wins a Contract.
Alcoa and Superior Industries Alcoa Aluminio won a contract
International teamed up in in Brazil from French carmaker
What are your favorite words from Charles Dickens? Ours
1996 to form a new company Peugeot to furnish a foundry
are not to be found in the copper of David Copperﬁeld nor the
offering cast aluminum wheels wheel alloy speciﬁcally devel-
nickel of Nicholas Nickleby but rather the aluminum of
for commercial trucks and oped for Peugeot’s application.
an essay titled, simply, “Aluminum.” This appeared in March,
buses. Developed jointly, the It’s the ﬁrst alloy that Aluminio
1857 in Dickens’ weekly publication, Household Words.
new wheels have now gone into has invented for an end user.
limited production at Superior’s Anticipated 1997 shipments:
“But within the course of the last two years…a treasure has
plant in Van Nuys, Calif. and 2,800 metric tons.
been divined, unearthed, and brought to light…What do you
think of a metal as white as silver, as unalterable as gold, as
easily melted as copper, as tough as iron; which is malleable,
ductile, and with the singular quality of being lighter than
glass? Such a metal does exist, and that in considerable
quantities on the surface of the globe.
“The advantages to be derived from a metal endowed with
such qualities are easy to be understood. Its future place as
a raw material in all sorts of industrial applications is
undoubted, and we may expect soon to see it, in some shape
or other, in the hands of the civilized world at large.”
are useful in treating acidic
grain, notably soy beans, and
soils. Feedstocks for these prod-
the largest producer and
ucts are materials generated
exporter of chickens.
during the production of mag-
nesium, which is Northwest’s
Plastic in China. Asian-
Alcoﬂon rooﬁng tops the Maracan soccer stadium in Rio de Janeiro.
principal product line. Field
American Container Manufac-
are being tested by several New Brand Names in Brazil. testing was completed in 1996,
turing Co., a 1996 start-up in
truck ﬂeets. They’ll be market- In 1996 the ﬂat-rolled products and market acceptance was
China by Alcoa Closure
ed by Alcoa’s existing wheel division of Alcoa Aluminio described as very encouraging.
Systems International, is up
sales organization, including launched two proprietary alu- Shipments will begin in the
and running and has now
introduction at several trade minum rooﬁng products — ﬁrst half of 1997.
received its ﬁrst order for PET
shows in early 1997. plastic beverage bottles. First
Habitat and Alcoﬂon — for resi-
customer is Tianjin Coke,
dential and Recordbreakers. A 1996 year-
Wheels for Light Trucks. A which ordered seven million
industrial end review at Alcoa Fujikura’s
new $20 million forged wheel 1.25-liter straight-wall bottles.
buildings. Spartanburg, S.C. telecommuni-
facility is nearing completion Now, two cations facility identiﬁed 30 new
at Alcoa’s Cleveland, Ohio Promising By-Products.
more brands records set for productivity,
plant site. Designed to a capac- Alcoa’s Northwest Alloys facili-
are rolling output, and scrap reduction.
ity of 900,000 wheels a year, ty in Addy, Washington is
out, named This performance was achieved
the plant will make aluminum building a new plant to supply
Pantanal and despite the fact that many of
wheels for Chrysler’s Dodge calcium and magnesium lime
Agrotelha. These are sheet roof- the employees involved were
Ram pickup trucks. It’s the ﬁrst and fertilizer products to the
ing products for grain storage new to the company. Since the
step in a multiphase plan to Northwest region of the U.S.
and chicken farm buildings. It operation was in a high growth
increase production of forged Crops such as corn and pota-
was a timely launch because mode in 1996, roughly a third of
aluminum wheels for the U.S. toes often need magnesium
Brazil is emerging as the the employees had less than
light truck market. fertilizer, and calcium silicates
world’s largest producer of one year of service.
a general consolidation of aero- stands for All-Dielectric-Self-
space composite suppliers Supporting. All-dielectric (no
throughout the industry. metal) construction allows
installation and maintenance
Yale Teams Up with Alcoa. on energized electrical circuits
Alcoa and Yale University School (hot wires) of transmission lines.
of Medicine will work together And the cable’s small diameter
on issues of occupational and and light weight minimize ice
environmental health. In this and wind load on transmission
innovative arrangement, the towers, poles, and hardware.
school’s Occupational and Based on its success in manu-
Environmental Medical facturing and marketing ADSS
Kaal Australia Expands. waste reduction. They’ve Program, directed by Mark R. cable, AFL plans to expand
Alcoa and Kobe Steel of Japan surpassed that target with Cullen, M.D., will work with capacity in 1997.
acquired Alcoa of Australia’s reductions of 66% in solid Alcoa’s medical and occupation-
Pt. Henry rolling mill for A$100 waste and 91% in hazardous al health staff to provide ser- New Patent for a Lead-Free
million (US$83 million), adding waste shipped off-site. vices that heretofore have been Alloy. Alcoa received a patent
it to their Kaal Australia Pty. delivered by internal personnel. for UltrAlloy X6020, the ﬁrst
joint venture. This 50/50 ven- Composite Structures Sold. Dr. Cullen is professor of medi- lead-free aluminum alloy with
ture was formed in late 1995 Alcoa sold its Composite cine and epidemiology. His team “A” rated machinability — the
when Alcoa and Kobe bought Structures unit in Monrovia, will develop and evaluate med- industry’s highest rating.
Comalco Ltd.’s rolling mill at Calif., to an investment group ical protocols and work with UltrAlloy X6020 is the ﬁrst
Yennora in formed by Quarterdeck Equity Alcoa staff on companywide free-machining aluminum
New South Partners Inc. of Los Angeles health programs. alloy developed without using
Wales. The and interests of the Pritzker lead additions to enhance
two mills family in Chicago. Composite A Fast-Growing Product Line. machining characteristics and
supply high Structures has annual revenues AFL’s most proﬁtable product for surface ﬁnish.
quality alu- of about $40 million from the the year was ADSS ﬁber-optic
minum can sale of composite materials and cable for the electric utility, Knowing the Business.
stock to Australian and Asian structures for aerospace appli- telecommunications, and cable Knowledge is power, and work-
canmakers and general sheet cations. The sale coincides with television industries. ADSS ers who understand the busi-
and foil products to Australian ness basis of what they do tend
markets. Their combined to be more focused and effec-
The Long View
cold-rolling capacity exceeds tive. That’s the impetus behind
A Perspective on Risk
200,000 mt a year, the largest in new business education pro-
the South Asia-Paciﬁc region. grams at several Alcoa business
units. In a joint effort by Rigid
“If we had no liquid capital markets that enable savers to
Down with Waste and Packaging and Primary Metals,
diversify their risks, if investors were limited to owning just
Pollution. Alcoa Technical managers conduct six sessions,
one stock (as they were in the early days of capitalism), the
Center (ATC) earned exploring the structure of the
great innovative enterprises that deﬁne our age — companies
Pennsylvania’s Environmental business, customers and com-
like Microsoft, Merck, DuPont, Alcoa, Boeing, and McDonald’s
Excellence Award for its com- petition, proﬁts and their mea-
— might never have come into being. The capacity to manage
mitment to environmental surement, and the role of the
risk, and with it the appetite to take risk and make forward-
compliance and for programs individual in building success.
looking choices, are key elements of the energy that drives
that saved more than $7.1 mil- In the Packaging Equipment
the economic system forward.”
lion since 1991 by reducing business unit, a new course
waste and preventing pollution. centers on the “why” of busi-
Peter L. Bernstein in the introduction to his new book,
In 1991 ATC Alcoans estab- ness and the story told by
Against The Gods: The Remarkable Story of Risk
ﬁnancial reports. I I I
lished a yearly goal of 10%