Metals firm Alcoa said on Monday it would split into two publicly traded entities, acknowledging that its legacy aluminum operations and higher-value and automotive businesses were diverging and no longer compatible.
New York-based Alcoa's traditional smelting business has been hurt by a ballooning surplus of aluminum, which has caused prices to sink and deepened the industry's worst crisis in years.
At the same time, the company has bet on growth from higher-margin titanium and high-strength aluminum sales to the aerospace industry, citing a growing order book for airplane production and renewed global spending on automobiles. Airplane manufacturers have turned to lightweight titanium from aluminum and automakers to new, strong aluminum alloys instead of high-strength steel to improve performance and fuel efficiency.
Klaus Kleinfeld, Alcoa chairman and CEO, said on Monday that it was the "right time to split the business."
He said the right size, strength and scale of the two businesses "allows us to put both businesses onto their own path independently to pursue their own strategies, which are very distinct."
Kleinfeld spoke in an interview on CNBC's "Squawk on the Street" Monday. He said that Alcoa's upstream business should not be equated with only aluminum. "We are very comfortable that the upstream business can go through any cycle no matter where it stands," he said.