Alcoa Wins $1 Billion Parts Deal With Airbus
October 05 2015 - 4:00PM
Dow Jones News
Alcoa Inc. on Monday said it signed a $1 billion deal to supply
airplane maker Airbus Group SE with bolts, rivets and other pieces
used to hold planes together.
The contract, which New York-based Alcoa calls the largest deal
for "aerospace fastening systems" in its history, comes only a week
after the 126-year-old aluminum maker said it would split itself in
two.
The parts, to be made from titanium, steel and nickel-based
alloys at 14 factories, will be used on planes including the Airbus
A350, the Toulouse, France-based plane maker's newest commercial
aircraft, the A320neo and the A330. The pieces, designed to
withstand lightning strikes and be more resistant to wear, will be
used for "the assembly of aircraft panels and engine pylons on
newer airplanes with sophisticated design features," Alcoa
said.
Chief Executive Klaus Kleinfeld called the fastening systems
"breakthrough technologies for some of the most advanced aircraft
in the world." Alcoa also has supply agreements with Airbus rival
Boeing Co.
Airbus confirmed the deal, saying "majority of the work relevant
to the contract" would be completed in California, as well as in
"more than a dozen other Alcoa sites around the world."
Alcoa's stock was recently up 8% to $10.30.
The company's raw-aluminum business has been battered by falling
aluminum prices, driven by booming Chinese exports. Last week, the
company said its mining, processing and smelting divisions would
next year become a separate company, still called Alcoa. A second
company, whose name has yet to be determined, will be spun off and
focus on making parts and pieces for airplanes and cars, including
in deals like the Airbus contract. That company is expected to be
the more profitable one.
Under Mr. Kleinfeld, Alcoa last year bought U.K.
jet-engine-parts maker Firth Rixson Ltd., and this year acquired
Pittsburgh-based RTI International Metals Inc., one of the world's
biggest makers of fabricated titanium products for the aerospace
industry. Those acquisitions made the split announced last week a
better option than selling off the raw-aluminum business, according
to people familiar with the matter. Mr. Kleinfeld, a former Siemens
AG executive, will remain CEO of the still-unnamed company and will
be temporary chairman of the new Alcoa.
Alcoa's new spinoff company will compete with Portland-based
Precision Castparts Corp., which Warren Buffett's Berkshire
Hathaway Inc. agreed to buy in August for about $32 billion, the
investor's biggest acquisition yet.
For the second quarter, Alcoa posted a profit of $140 million,
or 10 cents per share, up slightly from a year earlier. Its
smelting division earned $67 million, a 31% drop from a year
earlier, and its average "third-party realized price," which it
charged outside customers, fell 5% to $2,180 per metric ton.
Alcoa will kick off earnings season for major U.S. companies
this week, with third-quarter results due out on Thursday.
Joann S. Lublin contributed to this article.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 05, 2015 15:45 ET (19:45 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
Arconic (NYSE:ARNC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Arconic (NYSE:ARNC)
Historical Stock Chart
From Apr 2023 to Apr 2024