Alcoa 2014 Annual Report Download - page 129

In May 2013, management approved the permanent shutdown and demolition of two potlines (capacity of 105,000
metric-tons-per-year) that utilize Soderberg technology at the Baie Comeau smelter in Québec, Canada (remaining
capacity of 280,000 metric-tons-per-year composed of two prebake potlines) and the full capacity (44,000 metric-tons-
per-year) at the Fusina smelter in Italy. Additionally, in August 2013, management approved the permanent shutdown
and demolition of one potline (capacity of 41,000 metric-tons-per-year) that utilizes Soderberg technology at the
Massena East smelter in New York (remaining capacity of 84,000 metric-tons-per-year composed of two Soderberg
potlines). The aforementioned Soderberg lines at Baie Comeau and Massena East were fully shut down by the end of
September 2013 while the Fusina smelter was previously temporarily idled in 2010. Demolition and remediation
activities related to all three facilities began in late 2013 and are expected to be completed by the end of 2015 for
Massena East and by the end of 2017 for both Baie Comeau and Fusina.
The decisions on the Soderberg lines for Baie Comeau and Massena East were part of a 15-month review of 460,000
metric tons of smelting capacity initiated by management in May 2013 for possible curtailment, while the decision on
the Fusina smelter was in addition to the capacity being reviewed. Factors leading to all three decisions were in general
focused on achieving sustained competitiveness and included, among others: lack of an economically viable, long-term
power solution (Italy); changed market fundamentals; other existing idle capacity; and restart costs.
In 2013, exit costs related to the shutdown actions included $114 for the layoff of approximately 550 employees
(Primary Metals segment), including $83 in pension costs (see Note W); accelerated depreciation of $58 (Baie
Comeau) and asset impairments of $18 (Fusina and Massena East) representing the write-off of the remaining book
value of all related properties, plants, and equipment; and $55 in other exit costs. Additionally in 2013, remaining
inventories, mostly operating supplies and raw materials, were written down to their net realizable value resulting in a
charge of $9 ($6 after-tax), which was recorded in Cost of goods sold on the accompanying Statement of Consolidated
Operations. The other exit costs represent $48 in asset retirement obligations and $5 in environmental remediation,
both of which were triggered by the decisions to permanently shut down and demolish these structures, and $2 in other
related costs.
As of December 31, 2014, approximately 1,440 of the 1,530 employees (previously 1,660) were separated. The total
number of employees associated with the 2013 restructuring programs was updated to reflect employees, who were
initially identified for separation, accepting other positions within Alcoa and natural attrition. The remaining
separations for the 2013 restructuring programs are expected to be completed by the end of 2015. In 2014 and 2013,
cash payments of $39 and $33, respectively, were made against layoff reserves related to the 2013 restructuring
programs.
2012 Actions. In 2012, Alcoa recorded Restructuring and other charges of $172 ($106 after-tax and noncontrolling
interests), which were comprised of the following components: $85 ($33 after-tax and noncontrolling interest) related
to the civil portion of a legal matter (see Civil Suit under Litigation in Note N); $47 ($29 after-tax and noncontrolling
interests) for the layoff of approximately 800 employees (390 in the Engineered Products and Solutions segment, 250
in the Primary Metals segment, 85 in the Alumina segment, and 75 in Corporate), including $10 ($7 after-tax) for the
layoff of an additional 170 employees related to the previously reported smelter curtailments in Spain; $30 ($30 after-
tax) in asset impairments and $6 ($6 after-tax) for lease and contract termination costs due to a decision to exit the
lithographic sheet business in Bohai, China; $11 ($11 after-tax) in costs to idle the Portovesme smelter; $10 ($8 after-
tax) in other asset impairments; a net charge of $4 ($4 after-tax and noncontrolling interests) for other miscellaneous
items; and $21 ($15 after-tax and noncontrolling interests) for the reversal of a number of layoff reserves related to
prior periods, including $10 ($7 after-tax) related to the smelters in Spain. The reversal related to the smelters in Spain
was due to lower than expected costs based on agreements with employee representatives and the government, as well
as a reduction of 55 in the number of layoffs due to the anticipation of the restart of a portion of the previously
curtailed capacity based on an agreement with the Spanish government that will provide interruptibility rights (i.e.
compensation for power interruptions when grids are overloaded) to the smelters during 2013. A portion of this
reversal relates to layoff costs recorded at the end of 2011 and a portion of this reversal relates to layoff costs recorded
during 2012 (see above).
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