NEW YORK—Alcoa will split into two independent companies, separating its bauxite, aluminum, and casting operations from its engineering, transportation, and global rolled products businesses.
The century-plus-old metals maker has been dealing with a downturn in its smelting business because of lower aluminum prices. The split will create one company focusing on upstream products, including aluminum. The other company will focus on engineered products, which includes the automotive and aerospace segments.
The split is part of a wider movement by companies to spin off units in a bid to boost shareholder value. Often, the strategy helps free the stronger part of a company’s business from a weaker segment.
The aluminum and upstream products company will retain the Alcoa name. The name of the engineered products company has yet to be determined.
Alcoa Inc., which is based in New York with significant operations in Pittsburgh, expects the split to be complete by the second half of 2016. The company has been an industrial presence in the U.S. economy for well over a century, dating its founding as the Pittsburgh Reduction Co. in 1888.
“In the last few years, we have successfully transformed Alcoa to create two strong value engines that are now ready to pursue their own distinctive strategic directions,” CEO and Chairman Klaus Kleinfeld said in a statement.
The company has been shifting its focus to its more profitable automotive and aerospace products, which also involve titanium. It has been shutting down unprofitable aluminum smelters as a surplus of the material on the market weighs down prices and profit.
