Alcoa Inc, the world's largest aluminium producer, will sell off four units, halve capital spending and lay off  over 15,000 workers as it cuts production in the face of falling demand.

Alcoa, based in the US, also imposed a global salary and hiring freeze as it seeks to cope with the "extraordinary times," in the face of the global economic downturn.

For Alcoa, which expects a third quarter loss of almost $1 billion, this is the third production cut over the last three months. Alcoa is scheduled to announce its fourth quarter results next week.

According to Alcoa's latest plan,

• Smelting output will be reduced by 750,000 million tonnes per annum, or by 18 per cent;
• Headcount will be reduced by 13,500 (13 per cent of global workforce) and an additional 1,700 in contractor positions;
• Freeze salaries and hiring;
• Sell off four non-core downstream businesses;
• Reduce 2009 capital expenditures by 50 per cent;
• Take advantage of new sourcing for raw materials;
• Exchange equity stakes with Orkla -  Alcoa to take 100 per cent ownership of 2 Elkem smelters for its 45 per cent stake in SAPA; and
• Take after-tax charges for 4Q 2008 ranging from $900 to $950 million (80 per cent non-cash);

These measures are meant to conserve cash, reduce costs and strengthen the company's competitiveness through additional production curtailments, cost and procurement efficiencies, portfolio streamlining and reduction of capital expenditures and other liquidity enhancements during the current economic downturn, the company said in a release.

''These are extraordinary times, requiring speed and decisiveness to address the current economic downturn, and flexibility and foresight to be prepared for future uncertainties in our markets,'' said Klaus Kleinfeld, president and CEO of Alcoa Inc.

''We are taking a wide-ranging set of aggressive, but prudent, measures to ensure that Alcoa maintains its competitive lead in today's challenging markets while also emerging even stronger when the economy recovers,'' he added.

Targeted reductions, curtailments and plant closures and consolidations will reduce headcount by more than 13,500 employees or 13 per cent of the company's worldwide workforce by the end of 2009. An additional 1,700 contractor positions also will be eliminated. In addition, the company has also instituted a global salary and hiring freeze.

Besides the company is seeking alternative sources of procuring major inputs such as energy, coke, caustic soda, and aluminum fluoride. These actions are expected to yield savings of over 20 per cent in each of the materials. Alcoa also hopes to benefit from low oil and gas prices.

Nearly 80 per cent of the company's capacity is now covered by re-powering agreements and self generation through 2025.

Meanwhile, Alcoa and Orklaasa (Orkla) have agreed to exchange their stakes in a Norwegian smelting partnership and a Swedish extrusion joint venture in order to focus on their respective areas of expertise and best practices. Alcoa will receive Orkla's 50 per cent stake in Elkem Aluminum and Orkla will receive Alcoa's 45 per cent stake in the SAPA extrusion profiles business.

Elkem Aluminum, which will be 100 per cent owned by Alcoa following the transaction, includes aluminum smelters in Lista and Mosjoen, Norway with a combined output of 282,000 mtpy. The transaction also includes Elkem's stake in a newly opened anode plant in Mosjoen, in which Alcoa already holds an approximate 82 per cent stake.

Alcoa also intends to divest four non-core downstream businesses: Electrical and Electronic Systems; Global Foil; Cast Auto Wheels; and Transportation Products Europe.

These businesses had 2008 combined revenues of $1.8 billion and an estimated after-tax operating loss of approximately $105 million. The businesses employ a combined 22,600 people at 38 locations. Expected net proceeds for the divestitures are estimated to be approximately $100 million.

Alcoa's capital expenditures in 2009 are projected to be around $1.8 billion, down 50 per cent from 2008, and will be $1.5 billion after partner contributions. These will include approximately $750 million for the completion of key Brazilian growth projects. The Sao Luis refinery expansion and the greenfield Juruti bauxite mine are scheduled to be finished in the first half of 2009.

Alcoa will take total after-tax charge of $900-950 million in the fourth quarter due to restructuring, impairment and other special expenses, equivalent to $1.13 to $1.19 per share, of which approximately 80 per cent is non-cash.

The restructuring and divestiture programme is expected to save approximately $450 million before taxes on an annualised basis.