Three Quick Questions With Alcoa CEO Alain Belda: Prepare For A Hard Landing

April 14, 2005
Changes in Brazil, Russia, India, China and Korea will affect all manufacturers.

Alcoa CEO Alain Belda was the keynote speaker at this year's National Manufacturing Week in Chicago in March. Here, the aluminum executive expresses his views on how the changing world will require new strategic thinking from global manufacturers.

IW: You have said that the world is in the midst of a transformation -- a discontinuity from previous decades similar to the one experienced in the 1950s, which was driven by two world wars. What's driving this transformation?

Belda: Rather than happening in the Western hemisphere, as in the 1950s, it is happening in the BRICK (Brazil, Russia, India, China and Korea) countries. Two revolutions happening at the same time are driving this transformation: First is the urbanization in the BRICK countries, which will consume an enormous amount of resources. It will impact the environment and create another Western World in terms of population with per capita income in excess of $20,000. Simultaneously, labor and resource arbitrage will create a new set of competitive dynamics. It will challenge those of us with legacy costs in the Western World and create opportunities for new ones in the BRICKs that will leverage their markets in the same way. It will affect all manufacturers in many ways. We must compete against cheap imports. We must deal with our legacy costs, such as health care, environment legacies and labor costs. We must deal with facility closings and relocation costs. We must follow our customers in the regions where they grow. There is enough growth for everyone given the relative size of the Western economy versus the emerging ones, but the nature of growth will be different in each area.

IW: How will it be different?

Belda: In the West, growth will be more technology dominated. It will be segmented with smaller runs requiring quicker response time. New product development will deal with issues such as an aging population, health care, leisure, more services, greater integration of different sciences and processes, and management of entire supply chains -- our own and our customers. In the BRICK countries, it will be about infrastructure building, consumer awakening, transportation, energy, communications, and long runs of simpler products (commodities). It will be initially manufacturing dominated. Progress will be fast. These countries will be coming after many of the products, processes and technologies that will be in the West. They will also leapfrog to the latest products, latest applications and the latest manufacturing processes.

IW: How is Alcoa preparing for this?

Belda: First and foremost, we have been dealing with capabilities and culture for some time. Our board today is 50% American-born and 50% foreign-born. Our top management is 40% foreign-born and over 50% international, if we consider Americans that have lived long periods abroad. We have shared business systems and a common infrastructure applied across a globally connected workforce. We also strive to put Alcoa's strategies in line with meaningful global trends. We continually analyze our competitive position for the short and long term. And finally, what products/processes should we be focusing on to develop for this new world? We understand that development is not a linear process. There will be good and bad years, and there will be social and political problems. We are more concerned about a U.S. hard landing than a China one.

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