Manufacturing News

Alcoa smelter saved with multi-million-dollar bailout

Alcoa is confident it can operate its Point Henry aluminium smelter until at least 2014, following an earlier business review casting doubt on the future of the manufacturer.

Both the federal and Victoria governments  will provide funding for the ailing smelter, allowing it to invest in capital and save approximately 900 jobs.

Alcoa has been reviewing its Point Henry operation – near Geelong in Victoria – since February, because economic conditions were making it increasingly difficult for the business to operate in Australia.

“The review thoroughly considered all aspects of the smelter’s performance and outlook and the decision to continue production is the best economic outcome,” Alumina Limited CEO, John Bevan, told Alcoa shareholders on Friday.

According to Alcoa of Australia managing director, Alan Cransberg, the smelter was in dire straits back in February – and will continue to face extremely tough conditions in the future.

The aluminium operation reported fourth quarter operating losses of $193 million, with revenue down 7% to $6 billion.

“When the review was announced, the Point Henry smelter was facing substantial losses,” said Cransberg.

“Since then global market conditions, such as exchange rates and the aluminium price, have made the situation worse.

“However thanks to the efforts of our workforce, and the support we have received from both the Australian and Victorian governments, unions, contractors and suppliers, we believe we can minimise those losses.”

Australian Workers Union (AWU) national secretary Paul Howes said Friday’s announcement came as a uge relief to workers. 

"Today is an important turning point for Point Henry, and will hopefully set the smelter on a path towards long-term sustainability," Howes said.

"The smelter is old and has suffered from a lack of investment in new plant and equipment.

"This has made the site uncompetitive against newer overseas producers – especially in light of Australia's soaring exchange rate and the low international price for aluminium.

"With new capital investment from Alcoa, however, and the on-going commitment of workers to improve productivity, the smelter can have a bright future.

"The federal government must be congratulated for taking the initiative and providing assistance to see the smelter through this difficult trading period."

Alcoa’s Cransberg said the resilience and commitment shown by everyone at Point Henry over the last five months has been outstanding.

“It’s been a difficult and uncertain time for our people and they have not only ensured that the smelter has run smoothly, they have done it safely and with a resolve that makes us all proud,” he said.

“We set a challenge to find significant savings. We now need to implement the opportunities identified along with some structural changes that will see workforce reductions of about 10 percent – wherever possible these reductions will be voluntary.

“These savings and the government assistance are essential in the face of continuing tough economic conditions. The low metal price and high Australian dollar will continue to be a significant challenge for us, but we can now focus on finding more savings and continue investing in repairs and maintenance so the smelter remains a safe and efficient workplace.

“The way things are right now, two years is a long time in our industry. No one can predict exactly what’s going to happen with the global economy or where exchange rates and the price of aluminium will move.”

The Point Henry operations reportedly contribute over $300 million a year to the Australian economy, including over $100 million in Geelong and surrounding areas through wages, salaries and the purchase of goods and services.  

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