Alcoa unveils plan to slash costs

PITTSBURGH -- Aluminum producer Alcoa Inc. said Monday that it plans to slash its quarterly dividend by 82 percent and sell $1.1 billion worth of shares to bulk up its cash cushion amid the recession.

The Pittsburgh-based company also said it plans to cut costs by more than $2.4 billion annually by 2010. Alcoa said its actions will reduce capital spending by an additional $1 billion in 2010.

The announcement, made after the market closed Monday, follows news in January that Alcoa plans to lay off about 13 percent of its global work force by the end of 2009, further cut production and spending, and sell four of its subsidiaries.

Alcoa spokesman Kevin Lowery said details haven't been worked out to know how the announcement would specifically affect the Lafayette Operations, which employs approximately 800 people.

"Any of our operations will be working at ways to reduce overhead," Lowery said.

Alcoa has been hard-hit by the weakening world economy, and orders have plummeted for the lightweight metal used in everything from cars and aircraft to window frames and beer cans. Last year, prices tumbled at an unprecedented rate as demand fell in key markets such as autos and construction.

"Today's actions better prepare Alcoa to manage through a prolonged downturn," Klaus Kleinfeld, Alcoa's president and chief executive, said in a statement.

Alcoa will reduce its quarterly dividend to 3 cents per share from 17 cents, saving more than $400 million a year, according to the company. The dividend is payable May 25 to shareholders of record at the close of business on May 8.

Kleinfeld said "the decision was made after comparisons to peer companies and consideration of the interests of our shareholders."

Alcoa is the latest component of the Dow Jones industrial average to reduce its dividend in an effort to save money and brace for a difficult 2009. Some analysts had been urging Alcoa to take that step as the aluminum market worsened.

The company said its actions will yield $800 million in cash this year. By the second half of 2009, Alcoa said, it expects to cut capital spending by half, to $850 million annually. And by 2010, the company said it expects to lower procurement costs by $2 billion annually and cut overhead by $400 million.

Shares of Alcoa fell 63 cents, or 10.3 percent, to $5.49 in after-hours trading, having closed the regular session at $6.12.