Alcoa 2010 Annual Report Download - page 56

Restructuring and Other Charges—Restructuring and other charges for each year in the three-year period ended
December 31, 2010 were comprised of the following:
2010 2009 2008
Asset impairments $139 $ 54 $670
Layoff costs 43 186 183
Other exit costs 58 37 109
Reversals of previously recorded layoff and other exit costs (33) (40) (23)
Restructuring and other charges $207 $237 $939
2010 Actions–In 2010, Alcoa recorded Restructuring and other charges of $207 ($130 after-tax and noncontrolling
interests), which were comprised of the following components: $127 ($80 after-tax and noncontrolling interests) in
asset impairments and $46 ($29 after-tax and noncontrolling interests) in other exit costs related to the permanent
shutdown and planned demolition of certain idled structures at five U.S. locations (see below); $43 ($29 after-tax and
noncontrolling interests) for the layoff of approximately 830 employees (625 in the Engineered Products and Solutions
segment; 75 in the Primary Metals segment; 25 in the Flat-Rolled Products segment; 15 in the Alumina segment; and
90 in Corporate); $22 ($14 after-tax) in net charges (including $12 ($8 after-tax) for asset impairments) related to
divested and to be divested businesses (Automotive Castings, Global Foil, Transportation Products Europe, and
Packaging and Consumer) for, among other items, the settlement of a contract with a former customer, foreign
currency movements, working capital adjustments, and a tax indemnification; $2 ($2 after-tax and noncontrolling
interests) for various other exit costs; and $33 ($24 after-tax and noncontrolling interests) for the reversal of prior
periods’ layoff reserves, including a portion of those related to the Portovesme smelter in Italy due to the execution of a
new power agreement.
In early 2010, management approved the permanent shutdown and demolition of the following structures, each of
which was previously temporarily idled for different reasons: the Eastalco smelter located in Frederick, MD (capacity
of 195 kmt-per-year); the smelter located in Badin, NC (capacity of 60 kmt-per-year); an aluminum fluoride plant in
Point Comfort, TX; a paste plant and cast house in Massena, NY; and one potline at the smelter in Warrick, IN
(capacity of 40 kmt-per-year). This decision was made after a comprehensive strategic analysis was performed to
determine the best course of action for each facility. Factors leading to this decision included current market
fundamentals, cost competitiveness, other existing idle capacity, required future capital investment, and restart costs, as
well as the elimination of ongoing holding costs. The asset impairments of $127 represent the write off of the
remaining book value of properties, plants, and equipment related to these facilities. Additionally, remaining
inventories, mostly operating supplies, were written down to their net realizable value resulting in a charge of $8 ($5
after-tax and noncontrolling interests), which was recorded in COGS. The other exit costs of $46 represent $30 ($19
after-tax and noncontrolling interests) in asset retirement obligations and $14 ($9 after-tax) in environmental
remediation, both triggered by the decision to permanently shutdown and demolish these structures, and $2 ($1
after-tax and noncontrolling interests) in other related costs.
As of December 31, 2010, approximately 630 of the 830 employees were terminated. The remaining terminations are
expected to be completed by the end of 2011. In 2010, cash payments of $21 were made against layoff reserves related
to 2010 restructuring programs.
2009 Actions–In 2009, Alcoa recorded Restructuring and other charges of $237 ($151 after-tax and noncontrolling
interests), which were comprised of the following components: $177 ($121 after-tax and noncontrolling interests) for
the layoff of approximately 6,600 employees (2,980 in the Engineered Products and Solutions segment; 2,190 in the
Flat-Rolled Products segment; 1,080 in the Primary Metals segment; 180 in the Alumina segment; and 170 in
Corporate) to address the impact of the global economic downturn on Alcoa’s businesses and a $9 ($6 after-tax)
curtailment charge due to the remeasurement of pension plans as a result of the workforce reductions; $41 ($20 after-
tax) in adjustments to the Global Foil and Transportation Products Europe businesses held for sale due to unfavorable
foreign currency movements for both businesses and a change in the estimated fair value for the Global Foil business
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