Restructuring and Other Charges, Net

3 Months Ended

Mar. 31, 2021

Restructuring And Related Activities [Abstract]

Restructuring and Other Charges, Net

D. Restructuring and Other Charges, Net – In the first quarter of 2021, Alcoa Corporation recorded Restructuring and other charges, net, of $7 which were comprised of the following components:

• A net charge of $9 related to the settlement and curtailment of certain other postretirement benefits resulting from the sale of the Warrick Rolling Mill (see Note L);

• A charge of $6 for additional take or pay contract costs related to the curtailed Wenatchee (Washington) and Intalco (Washington) smelters;

• A $12 reversal of remaining environmental and asset retirement obligation reserves at a previously closed Tennessee site due to the completion of demolition and the determination that remaining site remediation is no longer required (see Note P). The reserves were originally established through a restructuring charge upon closure of the site; and,

• A net charge of $4 for several other insignificant items.

In the first quarter of 2020, Alcoa Corporation recorded Restructuring and other charges, net of $2 which was comprised of several insignificant items including a $3 charge related to pension curtailments.

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:

	First quarter ended March 31,
	2021			2020
Bauxite	$	—		$	—
Alumina		—			2
Aluminum		15			2
Segment total		15			4
Corporate		(8	)		(2	)
Total Restructuring and other charges, net	$	7		$	2

During 2019, the Company completed the divestiture of the Avilés and La Coruña (Spain) aluminum facilities to PARTER Capital Group AG (PARTER) in a sale process endorsed by the Spanish government and supported by the workers’ representatives. In 2020, PARTER sold its majority stake in the facilities to an unrelated party. The Company had no knowledge of the subsequent transaction prior to its announcement, and has filed a lawsuit asserting that the sale was in breach of the sale agreement between Alcoa and PARTER.  

As a result of the divestiture, a restructuring reserve of $30 remained at December 31, 2020 related to financial contributions to the divested entities pursuant to the sale agreement. In the first quarter of 2021, cash payments of $6 were made against the reserve. In accordance with the terms of the agreement, payments against the restructuring reserve may be made through the fourth quarter of 2021. These payments are dependent upon the divested entities meeting certain capital expenditure obligations. A portion of the remaining payments could be offset by financial compensation of indirect carbon costs received by the divested entities from the Spanish government.

Activity and reserve balances for restructuring charges were as follows:

	Severance and employee termination costs			Other costs			Total
Balance at December 31, 2019	$	35		$	102		$	137
Restructuring and other charges, net		16			36			52
Cash payments		(41	)		(79	)		(120	)
Reversals and other		(4	)		(2	)		(6	)
Balance at December 31, 2020		6			57			63
Restructuring and other charges, net		—			6			6
Cash payments		(2	)		(11	)		(13	)
Balance at March 31, 2021	$	4		$	52		$	56

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 liability accounts such as environmental obligations (see Note P), asset retirement obligations, and pension and other postretirement reserves (see Note L) are excluded from the above activity and balances. Reversals and other includes reversals of previously recorded liabilities and foreign currency translation impacts.

The noncurrent portion of the reserve was $1 at both March 31, 2021 and December 31, 2020.