Alcoa bullish about business prospects in China

Editor's note: Klaus Kleinfeld, chairman and CEO of lightweight metals leader Alcoa, is participating in the Summer Davos Forum in Tianjin. In an interview with China Daily before the forum, he shared his ideas about the industry and his company's future development.

This year's Summer Davos revolves around the theme of "the fourth industrial revolution and its transformational impact". How is Alcoa charting its route to revolution and transformation?

Alcoa has consistently transformed itself over its 126-year history. We invented the modern aluminum-making process, helped make modern flight possible and have continued to innovate with high-tech, multi-material solutions that have shaped global markets.

Later this year, Alcoa will complete its latest transformation by launching two independent, Fortune 500, publicly traded companies: a globally competitive commodity business, which will carry the Alcoa name; and a multi-material, innovation and technology-driven company, which will be named Arconic.

These two businesses, each with distinct and compelling value drivers, are uniquely positioned to seize the opportunities offered by the "fourth industrial revolution".

Why did Alcoa decide to split into two companies? How does this transformation afect China?

In recent years we substantially repositioned Alcoa by building out two major value engines. On the Arconic side, we reshaped the portfolio through homegrown innovation and organic growth. We successfully built up our automotive business to capture the North American light-weighting shift. We brought a new generation of aluminum lithium to the aerospace market and we have driven the resurgence of metallic structures. And, we have massively expanded our offerings for jet engine components. Today we can supply about 90 percent of all jet engine parts and are strongly supporting our jet engine customers in their massive drive for new performance highs.

We have also built out our additive manufacturing skills strongly focused on lightweight metals. Our capabilities stretch from rapid prototyping to proprietary technologies like Ampliforge and also include classic additive manufacturing. Furthermore we built a metals powder plant specially designed to supply the 3-D printing market with what I call the "smart ink of the future". We are proud of our future Arconic businesses holding roughly 80 percent of either the No 1 or No 2 positions in their markets.

At the same time, on the commodity side, we significantly lowered our cost position, closed uncompetitive capacity and repowered our portfolio with more competitive energy solutions. As a result, in just a few years we have moved down the aluminum cost curve 8 points to the 43rd percentile and down the alumina cost curve 7 points to the 23rd percentile.

As two companies, we will be better suited to serve our Chinese customers. Arconic will have six value-added manufacturing facilities and 1,300 employees in China ready to meet increasing demand for precision engineered, multi-material solutions in the aerospace, automotive, commercial transportation, high-speed rail and packaging markets. The new Alcoa will be well positioned, as the world's largest bauxite miner and a low-cost alumina refiner, to become a supplier of choice to its Chinese customers.

What will be the focus and global strategic layout of the new company Arconic?

The focus of Arconic will be profitable growth through innovation. It is best expressed in Arconic's tag line "innovation, engineered". From 3D printing to advanced manufacturing processes to groundbreaking new alloys, Arconic will be at the forefront of the technology revolution in manufacturing. Arconic's high-performance materials are on virtually every aircraft, spacecraft and jet engine flying. In automotive, we are driving one of the most significant disruptions in the industry's history - the lighter, more fuel-efficient and safer aluminum-intensive vehicles.

Finally, our aluminum heavy-duty truck wheels allow commercial vehicles to increase payload while meeting weight regulations. And our building and construction solutions allow architects to bring their design dreams to life.

How will Arconic invest in China in the near future?

Today, our facilities in China produce key components for the country's most dynamic markets. These include high-quality aluminum sheets for buses; high-speed trains and consumer electronics; lightweight aluminum truck wheels; automotive heat exchangers; cutting edge jet engine components made from titanium, nickel and steel; and aluminum structural cast parts for aerospace applications.

Arconic will remain a committed partner to help develop China's indigenous aerospace industry. We will continue our collaboration on advanced alloys and structural concepts as well as fastener technologies with Commercial Aircraft Corporation of China on the C919.

We will help expand domestic automotive production, as aluminum light-weighting offers a compelling solution for Chinese manufacturers. We believe the same transformation of the automobile industry in the United States will progressively come to China.

Arconic is also well positioned to help China with its recently announced plans to extend high-speed rail tracks. We produce aluminum sheets for the world's fastest train, the CRH380, at our Bohai facility in Hebei province and look forward to continued partnership.

China is targeting becoming a manufacturing nation in its 13th Five-Year Plan (2016-20), which requires innovation. What do you think of such a strategy? And how will your company get involved in China's innovation strategy?

Unlocking China's innovation potential will be critical to the country's next stage of growth. The 13th Five-Year Plan recognizes the role advanced manufacturing will play in China's economic rebalancing and new normal growth.

China is wise to pursue policies such as "Made in China 2025", that are designed to upgrade the country's manufacturing competitiveness. Support from global manufacturers will be critical to helping China achieve these ambitious goals.

Arconic and the new Alcoa welcome additional in-country partnerships to share our innovation expertise. Both companies will seek to be part of China's transformation and we will continue to share the things we learn during this process with our Chinese stakeholders as we look to strengthen our collaboration in China - and for China.

(China Daily 06/27/2016 page4)