PITTSBURGH – Shares of Alcoa Inc. (AA) fell sharply Friday after the metals giant warned that labor problems and plant closings will weaken third-quarter profits.
The company, a component of the Dow Jones industrial average (search), said Thursday after the close of regular trading that it expects to earn 30 cents to 35 cents per share. Analysts surveyed by Thomson First Call had expected earnings of 52 cents a share.
Alcoa shares tumbled $2.44, or more than 7 percent, to $30.85 on the New York Stock Exchange (search).
"While we are not pleased with the short-term impact the labor issues have had on our bottom line, our actions are aimed at enhanced global competitiveness of our North American operations," chief executive Alain Belda said. "That is the best long-term job protection we can offer all of our employees."
Alcoa announced in July that it would cut 400 jobs and would not reopen the Wenatchee Works (search) smelter in Washington state due to a labor impasse. Alcoa said then it would record a pretax charge of $20 million in the third quarter to pay for the layoffs.
In the same month, Alcoa cut production by a third at a Quebec aluminum smelter that has been beset by labor problems. About 1,800 workers represented by the Syndicat des Employees de l'Aluminerie de Becancour went on strike July 7.
Also during July, Alcoa said it would take a $7 million charge to close an automotive components plant in Ohio due to overcapacity.
The Northwood plant, just outside of Toledo, will be shuttered by year's end.
Alcoa has shut down operations at a Jamaican refinery in anticipation of Hurricane Ivan. The effect of the temporary closure of the Jamalco plant, with 1.25 million metric tons of capacity, is not known, company officials said.
Market softness in the automotive, packaging and European end markets is also having a negative effect on earnings, as well as higher input costs, particularly energy in Europe and North America