Alcoa says weak dollar is bad for US industry

US manufacturing companies are being hurt rather than helped by the weak dollar, according to Klaus Kleinfeld, chief executive of Alcoa. Mr Kleinfeld told the Financial Times that he had discussed with officials in Washington the rapid decline in the dollar and said other companies were also beginning to become “vocal” about it. The head of Alcoa, one of the world’s largest aluminium producers, said: “It is actually hurting us substantially. There is this thought in the US that a weak dollar has been an additional stimulus programme for US companies.” But, he said, “most [US manufacturing companies] have an even larger manufacturing base today outside of the US”. Mr Kleinfeld, a former chief executive of Siemens, added: “It is particularly nasty when you have, like us, most of your sales in dollars?.?.?.?and you have cost structures which are in local currencies that have strongly increased like the Brazilian real, the Australian dollar, even the Canadian dollar.” Many mining companies – especially those operating in South Africa – have in recent months said dollar weakness and local currency strength is eroding their earnings and weighing heavily on their financial recovery. But Mr Kleinfeld’s comments suggest the problem extends much further. Mr Kleinfeld declined to put a figure on the financial impact the weak dollar was having on Alcoa. The 52-year-old German said that while he thought there were no concerted lobbying efforts taking place over the weak dollar, he thought “that there are US-headquartered companies that have similar experiences. They are starting to be vocal about it”. His tenure at Alcoa so far has been defined by the financial crisis and its effect on industrial production. Alcoa responded quickly to the slump in demand, shutting down the 20 per cent of its production capacity that was most expensive. It also cut its workforce by one-third and raised $1.4bn in March. Mr Kleinfeld said he did not foresee any imminent restarts for the mothballed production facilities. “We want to be cash flow neutral by the end of this year and cash flow positive next year and that, I think, is where we will come out,” Mr Kleinfeld said. Energy costs and dollar strength are the “big unknown variables in this game”, making the company’s performance difficult to predict, he said. But 2010 will almost certainly mark an improvement for Alcoa as its customer base in the developed world will begin to restock from critically low stock levels. “In general, we see that the distribution structure is totally empty,” he said. “Most of our distributors have so understocked that they will not be able to fulfil demand once it comes back.” Mr Kleinfeld added that he would welcome direct competition from Chinese aluminium companies such as Chinalco. “One of the reasons we are co-operating with [Chinalco] is because I believe we should see more Chinese companies have an international presence,” he said. Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.