This Morning in Metals: Alcoa Gets ‘Leaner, More Integrated’ Operating Model

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This morning in metals news, Alcoa announced structural changes to its operating model, Ford Motor Co. was downgraded by Moody’s to junk status and BHP is eyeing a more diversified future.

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Alcoa Announces New Operating Model

Aluminum producer Alcoa this week announced Monday that as of Nov. 1, it will institute a “leaner, more integrated” operating model.

“Alcoa will eliminate its business unit structure and consolidate sales, procurement and other commercial capabilities at an enterprise level,” the company said Monday. “Under the new operating model, the Alcoa Executive Team will also be streamlined from 12 to seven direct reports to the Chief Executive Officer. The new structure will reduce overhead, promote operational and commercial excellence, increase connectivity between the Company’s plants and leadership, ensure a continued focus on safety as our highest priority, and position Alcoa for sustainable profitability.”

Moody’s Downgrades Ford’s Debt Rating

Credit ratings agency Moody’s announced Monday that it had downgraded Detroit automaker Ford’s debt rating to Ba1, or junk status.

“The Ba1 ratings reflect the considerable operating and market challenges facing Ford, and the weak earnings and cash generation likely as the company pursues a lengthy and costly restructuring plan,” Moody’s said. “The restructuring is expected to extend for several years with $11 billion in charges, and a cash cost of approximately $7 billion. Ford is undertaking this restructuring from a weak position as measures of cash flow and profit margins are below our expectations, and below the performance of investment-grade rated auto peers. Moreover, these measures are likely to remain weak through the 2020/2021 period including a lengthy period of negative cash flow from the restructuring programs.”

BHP Prepares for the Future

Trade uncertainty abounds, affecting companies’ strategies going forward.

Miner BHP is looking to “reinvigorate” its portfolio, according to CFO Peter Beaven, as reported by Australian Mining. Among commodities with a particularly positive future, Beaven cited nickel, particularly vis-a-vis its use in electric vehicles.

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“What has also changed is that nickel itself is something that is incredibly important to the world,” Beaven was quoted as saying. “Today, it goes into stainless steel, but in the future all electric vehicles (EV) have batteries and the technology in batteries is changing.”

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