Rio Tinto Alcan studies options to further reduce costs amid tough global market

MONTREAL – Aluminum giant Rio Tinto Alcan is studying options to cut costs, including whether to seek the reopening of collective agreements for about 1,500 Quebec employees, as it moves to offset the challenges of a tough global market.

The Montreal-based aluminum division has provided cost reduction targets to each of its facilities around the world, but won’t release them publicly.

“We really have to reduce plant costs so they are more competitive and able to survive the current crisis,” said spokeswoman Claudine Gagnon.

Rio Tinto Alcan met Thursday with Canadian Auto Workers union representatives to discuss employee concerns about the weak global aluminum market, cost-reduction efforts and the planned closure this year of its cathode facility in Arvida, Que. About 50 employees affected by the closure will be relocated to other facilities.

The talks followed a general meeting of union employees about 10 days ago.

Gagnon said Rio’s facilities in Quebec and elsewhere around the world have to reduce costs. But the Arvida facility also faces an additional challenge because it will no longer meet Quebec’s environmental standards as of 2015.

She said the company hasn’t made any decisions about seeking the reopening of collective agreements affecting Local 1937 at Arvida and several affiliated facilities, including Vaudreuil, Laterriere and the Arvida research centre.

“That could be part of the options that will allow us to reduce our costs but that is what we are analyzing now.”

Other options include achieving savings over the next 12 to 18 months by changing work rules.

Rio Tinto Alcan wouldn’t exclude job reductions at those facilities, but Gagnon said it has no plans to reopen collective agreements at its other facilities, including Alma, Que.

CAW officials couldn’t be immediately reached for comment.

Marc Maltais of the United Steelworkers, which represents 786 workers in Alma, said the union has yet to meet with Rio about its demands to reduce costs.

While his union recognizes the difficulties facing the global aluminum industry, he said cheap energy makes Quebec one of the lowest cost operations in the world.

“The more it goes badly elsewhere the more it demonstrates the importance of the investment in Quebec, so the economic context for aluminum favours us,” the local union president said in an interview.

Gagnon said any moves to reduce costs in Alma will be in accordance with the existing collective agreement approved last July.

Rio Tinto Alcan’s cost-cutting exercise comes as the London-based parent company Rio Tinto (TSX:RIO) trims US$500 million in annualized costs through reducing capital expenditures, cutting support costs and freezing hirings as it adjusts to a slowdown in Chinese economic growth.

“We will make a particular effort to roll back the unsustainable operating capital cost increases we received through the sector over the past couple of years in these current conditions of weak markets and strong local currencies,” CEO Tom Albanese said last week during an investor day.

Rio Tinto bought the Canadian aluminum company Alcan Inc. for $38 billion in 2007.

Note to readers: This is a corrected story. An earlier version suggested Rio Tinto Alcan could seek to reopen collective agreements at several plants