Buoyed by its recent acquisition of metals manufacturer Firth Rixson, Alcoa [AA] expects future expansion by further acquisition of companies and internal investment, according to the head of its defense sector.
Alcoa Defense President Eric Roegner told Defense Daily Oct. 14 the company has spent more than roughly $215 million on expanding existing plants. The company this month opened what it calls the world’s largest aluminum-lithium plant, in Lafayette, Ind., where it will produce advanced, third-generation aluminum-lithium alloys for the aerospace industry. Alcoa invested $90 million in expanding its Lafayette facility.
Alcoa in May announced a $100 million expansion of its LaPorte, Ind., facility, where it will produce nickel-based superalloy jet engine parts. The company also invested $25 million at its Hampton, Va., power and propulsion facility that produces turbine blades for the power generation market and large nickel and titanium structural castings for aerospace engines, according to company statements. Alcoa expects the investment in Hampton to scale-up a breakthrough process technology that cuts the weight of its highest-volume jet engine blades by 20 percent and significantly improve aerodynamic performance.
“As long as we see complementary and adjacent aspects of the market out there, definitely expect to see more in the future,” Roegner said at the Association of the United States Army (AUSA) annual symposium in Washington.
In an early October earnings call, Alcoa CEO and Chairman Klaus Kleinfeld noted that with the Firth Rixson financing done he expected to close the $2.5 billion acquisition by the end of the year. Kleinfeld said the acquisition will double the company’s content in aerospace engines and will offer Alcoa leading-edge technology that it didn’t have before. Roegner said Firth Rixson is known for its isothermal forging technology and makes the highest-performing nickel discs “imaginable” for high-performance engines. Kleinfeld’s remarks came courtesy of the Seeking Alpha website.
Roegner said Alcoa has a goal of becoming a material-agnostic company to where an original equipment manufacturer (OEM) like Lockheed Martin [LMT] or engine maker Rolls-Royce will approach Alcoa for solutions. Roegner believes Alcoa can gain that type of trust because it won’t “push” a specific product like an aluminum plate, or a titanium forging, or a nickel casting.
“We’ll iterate with the customer and come up with what works best and actually help them think through some of the tradeoffs,” Roegner said.
Roegner said Alcoa’s business is divided into three parts: upstream, midstream and downstream. He said upstream is classic traded commodities, like refined aluminum, and the company has been pursuing growth in its upstream business by taking out high-cost positions while doubling-down on low-cost positions in an effort to better position itself on the cost curve.
Alcoa’s midstream business, Roegner said, is aluminum materials, including sheet and plate, and is where the company has performed predominantly organic investment. Alcoa’s midstream business also includes global packaging, like aluminum sheet used for beverage and food cans, and plate and sheet developed for aerospace, transportation and industrial.
The company’s downstream business, which Roegner is part of, is engineered products and solutions like multi-material airfoils for engines and industrial gas turbines, and multi-material fasteners for aerospace and transportation vehicles. Here, Roegner said, Alcoa is pursuing a two-pronged approach of both organic investment and external acquisition. He said the organic investment includes the expansion of facilities in Indiana and Virginia.
In addition to its new single-piece forged aluminum hull for combat vehicles that the company said will offer greater blast protection from improvised explosive device (IED) threats (Defense Daily, Oct. 14), Alcoa is pursuing a next-generation technology called functional gradient product. Roegner compared functional gradient product to plywood in that functional gradient product is a sandwich of different alloys that are bonded at the molecular level. While plywood has glue between layers of wood, Roegner said you can’t do that with metal armor because an oxide forms, creating issues.
What makes functional gradient product special, Roegner said, is Alcoa can cast the underlying material with different alloys and different strengths, allowing for further customization. He said you could put a very high strength alloy in the middle with ductile alloys on either side, providing the exact protection a customer wants, while outperforming titanium at a fraction of the cost.
Numerous Alcoa products can be found on the F-35, known as the Defense Department’s largest weapons program. Alcoa produces bulkheads, or what Roegner called the “spine,” for the F-35, as well as “stage one” blades on the high-pressure turbine of the F135 engine, developed by Pratt & Whitney, a division of United Technologies Corp. [UTX]