Wednesday, May 26, 2010

Alcoa (NYSE:AA) May Have First Strike in 24 Years

Health care costs could result in the first strike at Alcoa (NYSE:AA) in 24 years, in response to proposed price increases for employees at the company, which would triple costs for some workers if implemented.

A labor contract is set to end on May 31, and the proposal to increase health care costs for workers is part of what Alcoa is asking for.

If an agreement isn't reached, it could result in the first strike at the company since 1986. There are about 6,000 workers covered by this particular contract.

Another part of the changes Alcoa is asking for is in reference to benefits offered for new employees, where they are seeking elimination of retiree medical benefits, defined-benefit pension plans, and a reduction in overtime pay.

Alcoa said concerning the health care plan that it costs close to 45 percent more for each employee than their salaried workers get. The coverage is said to be excellent, and the same as other hourly and salaried workers in the U.S. get.

Costs for family coverage, which seems to be the main sticking point, would increase to around $315 a month, a major increase from the $87 a month it costs now, which is very cheap.

The economic conditions and low price of aluminum doesn't favor the union in this battle, and with prices down 10 percent in May, it's hard to see where they think they have leverage.

If the union gets to aggressive and cute, it probably wouldn't be hard to Alcoa to close the plants and benefit from it by aluminum prices probably going up.

The plants operating under the current contract account for approximately 27 percent of the aluminum smelting capacity of the company.

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