Alcoa to Take Write-Down, Cut Operations

Aluminum Co. of America, the nation’s largest aluminum producer, said Monday that it will reduce fourth-quarter after-tax earnings by $175 million in anticipation of closing one-fourth of its production capacity.

The closings, for which no times or sites were given, could eliminate the jobs of at least 650 employees currently laid off, although the figure could change depending on which facilities are closed, said Alfred T. Posti, an Alcoa spokesman.

The company employs about 39,000 workers in the United States and at its one consolidated overseas operation in the South American nation of Suriname.

Trend in Industry

Ron Shorr, a securities analyst for Bear, Stearns & Co. of New York, said: “Most everybody in the metals industry has been doing this kind of thing. It’s a continuation of a trend to . . . clean up your balance sheet, write things off, get your depreciation down for better earnings in the future.”

The cuts would eliminate 350,000 tons of idle capacity from Alcoa’s annual production capacity of 1.4 million tons. Development of a new smelting process will be halted as well, the company said.

Alcoa said the after-tax charge will help bring its operations into line with the world oversupply of aluminum, depressed prices and the growing involvement of foreign governments in aluminum production.

“Next year, it will probably increase their productivity” because Alcoa will be able to use its more modern, lower-cost facilities to fill orders, said Peter Anker, an analyst for First Boston Corp.

Alcoa reported third-quarter earnings of $57.1 million on revenue of $1.27 billion and, in the first nine months of the year, reported that it earned $104.3 million on revenue of $3.95 billion.

The spot price of aluminum peaked at around 77 cents per pound in early 1984, plunged to around 40 cents per pound and has recovered a bit to around 47 cents per pound, Shorr said.

Demand has been rising gradually over the years, he said.

The Aluminum Assn., which represents American manufacturers, estimated that 40% of overseas aluminum production is government controlled or influenced.

“Some of those governments, we assume, do not necessarily subscribe to the market factors of life” and may support production to raise Western currency and create jobs, association spokesman George Day said.

Alcoa also said it will discontinue funding development of the Alcoa Smelting Process and write down its investment in its Anderson County, Tex., plant where the work was under way.

The new process was expected to produce aluminum using 40% less electricity than the current industry average.