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alcoa Annual Reports 1996
 

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    alcoa Annual Reports 1996 alcoa Annual Reports 1996 Document Transcript

    • 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 By Market Letter to Shareholders 1 Special Report: Adding Value from the 11% 13% Ground Up 4 26% NewsBriefs 8 12% 14% Financials 21 1996 Revenues: Worldwide Operations 48 56% $13.1 Billion Business Units 51 15% Trends in Major Markets 52 17% 20% Officers 54 16% Directors 55 Shareholder Information 56 Glossary 58 Index 59 U.S. Packaging The Alcoa/Audi Partnership Pacific Transportation Europe Distribution and Other (back cover) Other Americas Alumina and Chemicals Building and Construction Aluminum Ingot 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. you…an account 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 accomplishments.” 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. 1
    • 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 1 ⁄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.) Wider Implications 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 Chairman and 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 Common Interests …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. finance, logistics, Importantly, this new contract was negotiated by the Business Unit Presidents who have to live environment.” 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. 2
    • Frontline Leadership 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 (accidents happen… 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 get glutted…strikes 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 our industry. Paul H. O’Neill Chairman and Chief Executive Officer February 10, 1997 3
    • 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 driveway.” 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. 4
    • Alumina chemicals are used to purify water and to make refractory bricks, ceramics, adhesives, catalysts, 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 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. Aluminum — 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 from bauxite. 6
    • 7
    • Is Off and Running. The business unit is developing A-CMI 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. minum automotive components, including suspen- Prowler Stirs New Labor Agreements. In sion system control arms for Excitement. May, Alcoa reached six-year A Landmark the all-activity vehicle that Chrysler’s Plymouth labor agreements with the Transaction. Alcoa Mercedes-Benz will build at its Prowler has riveted the United Steelworkers of America Aluminio issued 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- customer coupon, a 12-year final maturi- member for the redesigned require- ty, and an average life of 8.1 1997 Corvette sports car. The ments, years. It was priced at only 140 Corvette will be the first car in business 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. at Hawesville. 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 8
    • Aerospace A Well-Timed Internet activity on the Plymouth Web site. The Expansion 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 corporate headquarters 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. and growth. 9
    • Alcoa Scientists Help Looking for All Clear at Vancouver. The $600 a month in cost savings ‘Lady Lindy’ 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. number of 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 10
    • 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 Global H26 product from Aerospace/ resources management, process rate less than one-half the Information. Alcoa 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 Reaffirming Values. 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. whenever possible. 11
    • 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. 12
    • 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 13
    • 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- Satisfied 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- development, quality vide superior value for cus- assurance, manufac- 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- vehicle wheels. 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 14
    • of the aluminum can’s conve- nience, ability to keep products fresher, and unrivaled recy- cling record. 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, when serving. 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 aluminum annually. 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. 15
    • 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. fiber-optic cable. 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 copper telecommunication alumina and, in fact, has plans for further expansion of refining capacity cables from a manufacturing when the demand emerges. facility in São Paulo. 16
    • aluminum conference, Schultz two safety problems: it cuts and WMC. The chairman is 33/50 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. telecommunications facility 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. 17
    • Rave Reviews 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- seven seconds.” 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 the planet.” else.” 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- aluminum alloys.” 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, spaceframe…” and comfort.” 18
    • Historical Note Charles Dickens Cast Wheels Rolling Out. Innovation Wins a Contract. on Aluminum 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. I 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. I “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. 19
    • 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% 20