Alcoa Inc. announced the elimination of about 15,000 jobs, more plant closures, plans to sell assets and a 50% cut in capital expenditures to contend with the sustained recession.
The moves raise the question of whether other companies that have cut costs also will feel the need to dig deeper. Alcoa, the world's largest aluminum producer, announced a round of cost cutting in October when demand for commodities and the availability of credit began to fall.
The combined restructuring will result in a fourth-quarter charge of $900 million to $950 million, or $1.13 to $1.19 a share. The company expects to report fourth-quarter earnings next week. Alcoa earned $632 million, or 75 cents a share, in the fourth quarter of 2007.
"Many of these things are painful and many of these things are drastic," Alcoa Chief Executive Klaus Kleinfeld said in an interview Tuesday. "We will continue to monitor the dynamic market situation to ensure that we adjust capacity to meet any future changes in demand and seize new opportunities.
My theory right now is that companies are getting the pain out of the way now after a terrible year. Note this will cause a 4th quarter charge -- a charge at the end of a long and painful fiscal year.
However, a contrary view would be, "isn't there a big stimulus bill coming down the pike? Shouldn't that help a company that works with raw materials?"