Alcoa idles Italy smelters, hurting 2,000 workers

Aluminum producer Alcoa Inc. said Thursday it will temporarily idle production at its two smelters in Italy, affecting about 2,000 workers, after a decision by the European Union left the company's ability to secure electricity for the plants at low rates uncertain.

Italy for 10 years gave energy-intensive industries a break on power prices. The tariff was approved by the European Commission in 1995, when Alcoa purchased the smelters. Without that subsidy, Alcoa said the smelters - which employ 1,000 and another 1,000 workers indirectly, can't make money at current Italian power rates.

But the EU ruled Thursday that Italy's extension of electricity subsidies after 2005 did not comply with regulations, and is demanding that Alcoa repay those benefits to the state. Alcoa is appealing the decision.

"The EC is sending a signal to investors and workers that heavy industry is no longer a priority," said Alcoa President and CEO Klaus Kleinfeld, in a statement. "The EC's decision, which was not based on a complaint by a competitor or any third-party, will effectively shut down Italian aluminum production and make the European aluminum industry less competitive in the worldwide markets."

The smelters will be wound down by the second half of December. Alcoa's rolling mill in the town of Fusina, which is adjacent to the smelter, is not directly impacted by this action.

"We will continue to use every lever in an attempt to gain access to competitive power so that we can get our people back to work," said Marcos Ramos, president of Alcoa Primary Products Europe.

Pittsburgh-based Alcoa, which has about 63,000 employees globally, said it will book a pretax charge of $300 million to $500 million in the fourth quarter related to stopping production at the Italian smelters.

Alcoa shares fell 54 cents, or 4 percent, to close at $13.22.