President Obama is scheduled to visit aluminum producer Alcoa Inc.'s Davenport, Iowa, facility on Tuesday, as he continues to focus on the role of advanced manufacturing in creating jobs and boosting U.S. exports.
The plant, which opened in 1948 and employs 2,000 people, is "one of the most advanced manufacturing plants in the world," Alcoa boasts. Pittsburgh-based Alcoa has spent more than $200 million over the past decade to update the plant, which makes aluminum sheet and plate for the aerospace, defense, automotive and building and construction markets. The plant, which is the manufacturing hub of Alcoa's $3 billion aerospace business, produces high-tech alloys and wings for all major aircraft, including Airbus' A380 and Boeing's 747-8 and 777.
Jobs in America are good, but what you will not see or hear today is: A year ago, Alcoa was posting bad news on global profits
In Europe, for example, the European Aluminum Association projects that up to two-thirds of the continent’s smelters are under threat.What I have been saying for now years is that we who do work will be working for less money and the standard of living will also be coming down.
For a company such as Alcoa the situation means that rising aluminum demand may not bring fast-as-projected rising sales or climbing prices as it competes with an increasing supply of aluminum from low cost producers. And if Alcoa wants to compete in this new world in the future it will have to scrap some of its existing high cost plants and increase its capital spending to build more new plants in low-cost countries.
I don’t think it takes a whole lot of imagination to see how the aluminum crunch applies to other industries. In everything from potash to car parts the world has a tremendous amount of idle production capacity that’s just waiting to come back on line. When it does, this new supply will act to contain price increases that in many cases investors are counting on to increase company earnings in the future.
In other words, the global economic recovery in general may not be as profitable as investors now hope.