Arconic Inc. on Monday announced its first major supply deal, a $1 billion contract to supply Airbus Group SE with aluminum sheet and plate.
The company is a corporate heir to Alcoa, which still exists, but as a spun-off unit focused on producing raw aluminum.
Arconic's business strategy is aimed at getting out of mining and smelting, and instead supplying the aerospace and automotive industries?as Alcoa did over $10 billion in supply deals this decade?and it has touted its ability to generate complicated alloyed parts like lightning-resistant fasteners. This deal with Airbus, however, is to make the airplane's skeleton?meaty structural parts that keep it intact in the air and on landing.
Much of the aluminum being sold will go toward making Airbus' A320, and will come from a new machine called a "very thick plate stretcher" the company owns at a factory in Davenport, Iowa.
The plate stretcher is the kind of technology Arconic says will allow it to expand overall profit margins in ways it couldn't do when it was Alcoa and hamstrung by the ups and downs of the raw aluminum market. The machine, which literally stretches the metal, will come online in 2017 and make "high-strength monolithic wing ribs."
Arconic also says a key selling point is its special multimetal alloys with "combination of strength, corrosion resistance, density savings andmanufacturability."
Klaus Kleinfeld, formerly Alcoa's CEO who has now taken the helm of Arconic, said that the contract is "a further important step to expand our leadership position in the aerospace industry" and that "partnerships like this with industry leaders are core to our strategy."
Although the aerospace industry remains vulnerable to business cycles, Arconic is expected to sign more supply deals. Airbus and Boeing Co. have a combined $1.6 trillion order book of over 12,500 jets, and many models are sold out for years.
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(END) Dow Jones Newswires
November 07, 2016 12:55 ET (17:55 GMT)
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