Alcoa said yesterday that it would eliminate 4,250 jobs at its Mexican automotive supply business, accounting for more than half the jobs the aluminum producer plans to cut this year to combat global economic weakness.
The cuts will be made at plants in Ciudad Acuna and Torreon operated by the automotive unit of Alcoa Fujikura Ltd., a joint venture 51 percent owned by Alcoa and 49 percent owned by Japan's Fujikura Ltd. AFL Automotive makes electrical distribution systems and other products for the automotive industry.
Alcoa expects the jobs will be eliminated by July 31, reducing the AFL Automotive's Mexican work force 14 percent.
"The North American light vehicle market is extremely competitive and we need to make these tough decisions in order to be effective today and beyond," said AFL Automotive Vice President Jose Alvarado.
Spokesman Kevin Lowery said three factors were behind the decision: the loss of business, productivity improvements and the use of other plants to supply the unit's North American customers. AFL Automotive operates 30 plants in North America, South America, Europe and Asia.
The Mexican plants have been the subject of demonstrations at shareholder meetings in recent years, including last year when workers were fired after protesting working conditions.
At the time, workers complained that daily wages averaged $10. Alcoa said other companies in the region paid less and didn't provide comparable benefits.
Mexico's manufacturing operations along the U.S. border -- known as maquiladora -- have been hurt by China and other regions that pay workers even less, as well as by the Mexican peso's strength.
But the biggest reason for the problem is the anemic U.S. economy, said Jorge Gonzalez, chairman of the economics department at Trinity University in San Antonio, Texas.
"Once the U.S. economy picks up speed, employment in Mexican industry will start to increase once again," Gonzalez said.
Yesterday's announcement accounts for a majority of the 8,000 jobs Chairman Alain Belda plans to eliminate this year. Belda disclosed the plans in January, blaming a global recession that has lasted longer than anticipated.
Alcoa's profits fell 54 percent last year to $420 million, reflecting a $95 million charge related to the job cuts. First-quarter earnings of $151 million were 31 percent below year-ago levels.
Besides the cuts being made in Mexico, Alcoa is eliminating 110 jobs at a Massena, N.Y., smelting plant and 150 at its Rockdale, Texas, plant as part of a new labor agreement with the United Steelworkers union.
Belda also is shedding underperforming businesses that employ 2,100 and generated $1.3 billion in revenue last year. They include a specialty chemicals business based in Leetsdale.
Alcoa shares closed yesterday at $22.97, down 30 cents.