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Restructuring and Other Charges, Net
 12 Months Ended
Dec. 31, 2023
Restructuring and Related Activities [Abstract]  
Restructuring and Other Charges, Net

D. Restructuring and Other Charges, Net

Restructuring and other charges, net were comprised of the following:

 

 

2023

 

 

2022

 

 

2021

 

Settlements and/or curtailments related to retirement benefits (O)

 

$

21

 

 

$

632

 

 

$

977

 

Severance and employee termination costs

 

 

11

 

 

 

1

 

 

 

1

 

Loss on divestitures

 

 

—

 

 

 

79

 

 

 

—

 

Asset impairments

 

 

50

 

 

 

58

 

 

 

75

 

Asset retirement obligations (R)

 

 

41

 

 

 

34

 

 

 

23

 

Environmental remediation (S)

 

 

27

 

 

 

21

 

 

 

15

 

Other

 

 

36

 

 

 

(7

)

 

 

82

 

Reversals of previously recorded charges

 

 

(2

)

 

 

(122

)

 

 

(45

)

Restructuring and other charges, net

 

$

184

 

 

$

696

 

 

$

1,128

 

Severance and employee termination costs were recorded based on approved detailed action plans submitted by the operating locations that specified positions to be eliminated, benefits to be paid under existing severance plans, union contracts or statutory requirements, and the expected timetable for completion of the plans.

2023 Actions. In 2023, Alcoa Corporation recorded Restructuring and other charges, net, of $184 which were primarily comprised of the following components:

•
Non-cash settlement charges related to pension benefits (see Note O):
o
$21 related to the purchase of group annuity contracts to transfer approximately $235 of pension obligations and assets associated with defined benefit pension plans for approximately 530 Canadian retirees and beneficiaries;
•
Charges related to portfolio actions:
o
$101 for the permanent closure of the previously curtailed Intalco (Washington) smelter (see below);
o
$53 for the updated viability agreement for the San Ciprián (Spain) smelter; and,
o
$11 for employee termination and severance costs, primarily related to the Kwinana refinery productivity program (see below);
•
Other net charges:
o
$17 to record additional environmental and asset retirement related reserves at previously closed sites (see Note R and Note S);
o
$19 benefit for the sale of unused carbon credits at a previously closed site;
o
$1 to record additional asset retirement related reserves at Warrick Operations (Indiana) (see Note R); and,
o
$1 for additional take-or-pay contract costs related to the closed Wenatchee (Washington) and Intalco smelters;
•
Reversals:
o
$2 due to lower costs for demolition and remediation at previously closed sites (see Note R).

In December 2023, Alcoa began the closure of a line at its Warrick Operations site in Indiana that had not operated since 2016 to allow for future capital investments to improve casting capabilities. The Company recorded a charge of $1 in Restructuring and other charges, net on the Statement of Consolidated Operations to establish reserves related to demolition obligations. Additionally, Alcoa recorded $1 in Cost of goods sold on the Statement of Consolidated Operations to write-off the remaining net book value of related inventory.

In September 2023, the Company initiated productivity programs across its operations in Australia to mitigate the financial impacts of lower grade bauxite and to optimize operating levels. In connection with this program, the Company recorded Restructuring and other charges, net of $6 for employee termination and severance costs for approximately 90 employees at the Kwinana refinery. The restructuring action and associated cash outlays are anticipated to be complete by the end of the second quarter of 2024. In 2023, the Company spent $1 against the reserve.

In March 2023, Alcoa Corporation announced the closure of the Intalco aluminum smelter, which had been fully curtailed since 2020. The Company recorded charges of $117 related to the closure, including a charge of $16 in Cost of goods sold on the Statement of Consolidated Operations to write-down remaining inventories to net realizable value and a charge of $101 in Restructuring and other charges, net on the Statement of Consolidated Operations. The restructuring charges were comprised of asset impairments of $50, environmental and demolition obligation reserves of $50, and severance and employee termination costs of $1 for the separation of approximately 12 employees. Cash outlays related to the permanent closure of the site in 2024 and 2025 are expected to be approximately $54 related to environmental and demolition obligation reserves, $4 of which was reserved for in prior periods, and $31 related to holding costs during the closure. At December 31, 2023, the separation of employees associated with this program was complete with $1 of payments made against the severance and employee termination cost reserve.

In February 2023, the Company reached an updated viability agreement with the workers’ representatives of the San Ciprián smelter to commence the restart process in phases beginning in January 2024. The smelter was curtailed in January 2022 as a result of an agreement reached with the workers’ representatives in December 2021 (see below). Under the terms of the updated viability agreement, the Company is responsible for certain employee obligations during 2023 through 2025 and made commitments for capital improvements of $78. The Company recorded charges of $53 in Restructuring and other charges, net on the Statement of Consolidated Operations to establish the related reserve for employee obligations in 2023. Cash outlays related to these obligations were $7 in 2023 and the remainder is expected in 2024 and 2025. At December 31 2023, the Company has restricted cash of $91 to be made available for remaining capital improvement commitments at the site of $118 and smelter restart costs of $35 (see below). Restricted cash is included in Prepaid expenses and other current assets and Other noncurrent assets on the Consolidated Balance Sheet (see Note U).

2022 Actions. In 2022 Alcoa Corporation recorded Restructuring and other charges, net, of $696 which were primarily comprised of the following components:

•
Non-cash settlement charges related to pension benefits (see Note O):
o
$635 related to the purchase of group annuity contracts to transfer approximately $1,000 of pension obligations and assets associated with defined benefit pension plans for approximately 4,400 United States retirees and beneficiaries, as well as lump sum settlements;
•
Charges related to portfolio actions:
o
$79 for the agreement reached with the workers of the divested Avilés and La Coruña facilities to settle various legal disputes related to the 2019 divestiture (see Note S);
o
$58 for an asset impairment related to the sale of the Company’s interest in MRN (see Note H); and,
o
$29 related to the closure of the previously curtailed magnesium smelter facility in Addy (Washington) (see below);
•
Other charges and credits:
o
$26 to record additional environmental and asset retirement related reserves at previously closed sites (see Note R and Note S); and,
o
$7 net credit for revaluation of adjustments to take-or-pay contract reserves related to the closed Wenatchee and curtailed Intalco smelters;
•
Reversals:
o
$83 for the release of a valuation allowance on Brazil value added taxes (VAT) (see Note Q); and,
o
$34 due to lower costs for demolition and remediation at previously closed sites (see Note S).

In July 2022, Alcoa made the decision to permanently close the previously curtailed magnesium smelter in Addy. The facility has been fully curtailed since 2001. The Company recorded a charge of $29 to establish reserves for environmental and demolition obligations in Restructuring and other charges, net on the Statement of Consolidated Operations in the third quarter of 2022.

2021 Actions. In 2021 Alcoa Corporation recorded Restructuring and other charges, net, of $1,128 which were comprised of the following components:

•
Non-cash settlement charges related to pension and certain other postretirement benefits (see Note O):
o
$858 related to the purchase of group annuity contracts to transfer approximately $1,500 of pension obligations and assets associated with defined benefit pension plans for approximately 14,000 United States retirees and beneficiaries, as well as lump sum settlements;
o
$63 related to the purchase of a group annuity contract to transfer approximately $55 of pension obligations and assets associated with a Suriname pension plan for approximately 800 retirees and beneficiaries;
o
$47 related to lump sum settlements; and,
o
Net $9 related to the settlement and curtailment of certain other postretirement benefits resulting from the sale of the Warrick Rolling Mill;
•
Charges related to portfolio actions taken as part of the Company’s ongoing strategic review (see details below):
o
$80 related to the closure of the previously curtailed aluminum smelter facility in Wenatchee (Washington);
o
$62 related to the agreement reached with the workers at the San Ciprián aluminum smelter to curtail smelting capacity; and,
o
$27 related to the closure of the previously curtailed anode facility in Lake Charles (Louisiana);
•
Other charges:
o
$13 for additional take-or-pay contract costs related to the curtailed Wenatchee and Intalco smelters;
o
$11 to record additional environmental and asset retirement related reserves (see Note R and Note S); and,
o
$3 for several other immaterial items;
•
Reversals:
o
$6 for a take-or-pay energy-related obligation at the Alumar (Brazil) smelter no longer required due to the restart;
o
$17 related to the divestiture of the Avilés and La Coruña entities (see below); and,
o
$22 due to lower costs for demolition and remediation related to previously established reserves (see Note R and Note S).

In December 2021, the Company announced the two-year curtailment of 228 kmt of smelting capacity at the San Ciprián smelter. The temporary curtailment, which began at the end of January 2022, was the result of an agreement reached with the workers' representatives at the site to suspend production due to exorbitant energy prices in Spain. Under the terms of the agreement, the Company is responsible for certain employee obligations during 2022 and 2023, and committed to restart the smelter beginning in January 2024. The Company recorded charges of $62 in Restructuring and other charges, net on the Statement of Consolidated Operations to establish the related reserve for employee obligations in 2021. Cash payments were $31 and $26 in 2023 and 2022, respectively and this program is complete as of December 31, 2023. Additionally, the Company made restricted cash available for capital improvements at the site of $68 and smelter restart costs of $35 (see above).

During the fourth quarter of 2021, as part of the Company’s ongoing strategic portfolio review, the Company announced the permanent closure of the Wenatchee aluminum smelter. The smelter has been fully curtailed since 2015. Charges related to the closure totaled $90 in the fourth quarter of 2021 and included a charge of $10 for the write-down of remaining inventories to net realizable value recorded in Cost of goods sold on the Statement of Consolidated Operations and a charge of $80 recorded in Restructuring and other charges, net on the Statement of Consolidated Operations. The restructuring charges were comprised of: $30 to write-off the remaining net book value of various assets; $23 of asset impairments; $21 to establish reserves related to environmental and demolition obligations; $5 related to take-or-pay contractual obligations; and $1 of severance and employee termination costs from the separation of approximately 10 employees. Cash payments were $3 and $1 in 2023 and 2022, respectively.

During the third quarter of 2021, as part of the Company’s ongoing strategic portfolio review, the Company announced the decision to permanently close the previously curtailed anode facility in Lake Charles. The anode facility within the Lake Charles site has been fully curtailed since 2015. The Company recorded charges of $27 in the third quarter of 2021, which were recorded in Restructuring and other charges, net on the Statement of Consolidated Operations, comprised of asset impairments of $22 and cash-based charges for closure and asset retirement obligations of $5. The closure was completed in September 2022. The decision to permanently close the facility was made as part of the Company’s ongoing portfolio review. The Company’s petroleum coke calciner located at the same site in Lake Charles remains in operation, unaffected by the closure of the anode facility.

Alcoa Corporation does not include Restructuring and other charges, net in the results of its reportable segments. The impact of allocating such charges to segment results would have been as follows:

 

 

2023

 

 

2022

 

 

2021

 

Alumina(1)

 

$

8

 

 

$

(27

)

 

$

1

 

Aluminum

 

 

169

 

 

 

82

 

 

 

184

 

Segment total

 

 

177

 

 

 

55

 

 

 

185

 

Corporate

 

 

7

 

 

 

641

 

 

 

943

 

Total Restructuring and other charges, net

 

$

184

 

 

$

696

 

 

$

1,128

 

 

(1)
Beginning in January 2023, the Company changed its operating segments, by combining the Bauxite and Alumina segments, and reported its financial results in the following two segments: (i) Alumina and (ii) Aluminum (see Note E).

Activity and reserve balances for restructuring charges were as follows:

 

 

Severance
and
employee
termination
costs

 

 

Other
costs

 

 

Total

 

Balances at December 31, 2020

 

$

6

 

 

$

57

 

 

$

63

 

Restructuring charges, net

 

 

1

 

 

 

80

 

 

 

81

 

Cash payments

 

 

(4

)

 

 

(25

)

 

 

(29

)

Reversals and other

 

 

—

 

 

 

(22

)

 

 

(22

)

Balances at December 31, 2021

 

 

3

 

 

 

90

 

 

 

93

 

Restructuring charges, net

 

 

1

 

 

 

73

 

 

 

74

 

Cash payments

 

 

(2

)

 

 

(37

)

 

 

(39

)

Reversals and other

 

 

(1

)

 

 

(10

)

 

 

(11

)

Balances at December 31, 2022

 

 

1

 

 

 

116

 

 

 

117

 

Restructuring charges, net

 

 

11

 

 

 

55

 

 

 

66

 

Cash payments

 

 

(6

)

 

 

(118

)

 

 

(124

)

Reversals and other

 

 

—

 

 

 

4

 

 

 

4

 

Balances at December 31, 2023

 

$

6

 

 

$

57

 

 

$

63

 

The activity and reserve balances include only Restructuring and other charges, net that impact the reserves for Severance and employee termination costs and Other costs. Restructuring and other charges, net that affected other accounts such as Investments (see Note H), Accrued pension benefits and Accrued other postretirement benefits (see Note O), Asset retirement obligations (see Note R), and Environmental remediation (see Note S) are excluded from the above activity and balances. Reversals and other include reversals of previously recorded liabilities and foreign currency translation impacts.

The current portion of the reserve balance is reflected in Other current liabilities on the Consolidated Balance Sheet and the noncurrent portion of the reserve balance is reflected in Other noncurrent liabilities and deferred credits on the Consolidated Balance Sheet. The noncurrent portion of the reserve was $15 and $3 at December 31, 2023 and 2022, respectively.