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Alcoa Completes $300M Expansion at Tennessee Facility

Zacks Equity Research

Aluminum giant, Alcoa Inc. AA announced that it has completed the $300 million expansion at its Tennessee facility. The facility will supply aluminum sheet to the automotive industry and to automakers like Ford Motor Company F, Fiat Chrysler Automobiles and General Motors Company GM. This expansion has created 200 jobs.

The state-of-the-art facility is equipped with rolling mill technology that allows it to switch between automotive and can sheet production depending upon demand. The location also has a huge recycling facility for automotive scrap which offsets expense, eliminates waste for automakers, lowers operational cost and reduces Alcoa’s carbon footprint.

This is Alcoa’s second major North American automotive expansion backed by long-term customer contracts. The first expansion was conducted at the Davenport, IA plant, which reported a record increase of 20% year over year in automotive sheet shipments in second-quarter 2015.

Last week, Alcoa announced that it has signed a letter of intent with the Danieli Group to commercialize its breakthrough Micromill technology. Under the letter of intent, Danieli will license Alcoa’s intellectual property related to manufacturing advanced Micromill products.  

Additionally, Alcoa and Ford entered into an agreement wherein the latter selected Micromill material for its 2016 Ford F-150 truck. Alcoa further revealed that it has entered into a joint development agreement with Ford to utilize next-generation aluminum alloys for automotive parts using Micromill technology.

Automakers these days want lighter and stronger materials that will improve the performance of their vehicles.  The amount of aluminum body sheet content in North American vehicles is expected to grow by three times from 2012 to 2015 and increase elevenfold by 2025 from 2012 levels. Alcoa expects to grow its automotive sheet revenue roughly sixfold, from $229 million in 2013 to $1.3 billion in 2018. Capacity expansions in Tennessee and Davenport, along with breakthrough technologies like the Micromill, positions Alcoa as a premier partner for the automotive industry.

Alcoa currently has a Zacks Rank #3 (Hold).

A better-ranked stock in the basic materials space is Denison Mines Corp. DNN, which  carries a Zacks Rank #2 (Buy).

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FORD MOTOR CO (F): Free Stock Analysis Report
 
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