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Executives

Audrey Strauss - EVP, Chief Legal & Compliance Officer & Secretary

Klaus Kleinfeld - Chairman & CEO

Analysts

Alcoa, Inc. (AA) 2013 Annual Meeting of Shareholders Conference Call May 3, 2013 9:30 AM ET

Audrey Strauss

Good morning ladies and gentlemen. Welcome to the 125th Annual Meeting of Alcoa shareholders. A milestone year for our company. I am Audrey Strauss, Executive Vice President, Chief Legal and Compliance Officer and Secretary. Joining me on stage is Klaus Kleinfeld, our Chairman and Chief Executive Officer.

As we always do at Alcoa, we will discuss safety first. On the screen is a diagram of this room. And it shows the emergency exits. Please take a moment to familiarize yourself with the exit nearest to you. Exits are on the side left are right of the room. If for some reasons those exits are blocked you will turn at exit is toward the stage at the front. In the event of an emergency it will be announced either by an alarm or from this podium.

The agenda for today's meeting is listed on the next slide, this slide and in the brochure for the meeting at your seats. Our Chairman and Chief Executive Officer Mr. Kleinfeld who will be presiding at this meeting will now welcome you and introduce our Board of Directors.

Klaus Kleinfeld

Good morning. Thank you for coming and let me introduce first our Board of Directors and let me start with those that are standing for reelection. And I'll ask each of the directors who are seated here in front to stand when introduced and then be seated and I ask the audience to hold your applause until we have introduced all of the directors and then I would really ask you to recognize them well.

So let me start with the group that stands for reelection, that's up here; Art Collins, former Chairman and CEO of Medtronic, the director since 2010. Art also serves on the Board’s of Boeing, U.S. Bancorp and Cargo. Stan O'Neal, former Chairman and CEO of Merrill Lynch. He has been a Director since 2008. He has been with Merrill Lynch for 21 years and prior to that, senior financial positions at General Motors.

Mike Morris, Chairman and former President and CEO of American Electric Power company, one of America’s largest utilities. He is a Director since 2008. He serves on the Board’s of Limited Brand, Hartford Financial Services and Spectra Energy.

So let’s go to the next task; Kathryn Fuller, Chair of the Smithsonian National Museum of Natural History, Director since 2002, retired Chair of The Ford Foundation, past President and CEO of World Wildlife Fund, USA. Patricia Russo, former CEO of Alcatel Lucent, Director since 2008, the lead Director of General Motors, the Director of Merck and Hewlett Packard.

Judy Gueron, our lead Director. Judy has been with Alcoa as a Director since 1988 and she is a scholar and resident and President Emerita of MDRC and MDRC is a non-profit research organization that designs, matches and studies projects to increase the self sufficiency of economically disadvantaged group. Ernesto Zedillo, Director of the Yale Center for the Study of Globalization; Ernesto Zedillo is with us since 2002 and he is a former President of Mexico. He is an addition to being with us a Director of Procter & Gamble, Citigroup and Promotora de Informaciones.

And the last group of Directors, Sir Martin Sorrell, Founder, CEO and Director of WPP; WPP is the world’s largest advertising and marketing services group. He is a Director since 2012. Jim Owens, former Chairman and CEO of Caterpillar, a Director since 2005 and he also serves on the Board’s of IBM and Morgan Stanley. Ratan Tata; Ratan is the Chairman and emeritus of Tata Sons Limited, he is the director since 2007 and Tata Sons Limited is the holding company of the Tata Group, one of the world’s largest conglomerates including 96 companies. Thank you very much for your service.

Let me now introduce to you the executive team of Alcoa that is all well represented here in the room. The list of the names is there and those that find their name on this list would you be so kind to please stand up now and face the audience to be recognized.

Let’s also now go to the formal part of the business portion of the meeting and I will hand it over to Audrey Strauss again.

Audrey Strauss

You should all have a copy of the rules of conduct for this meeting, which can be found in the brochure at your seat. In order to conduct an orderly meeting we ask that participants to follow these rules.

Notice of this meeting and the proxy voting materials were made available to each shareholder entitled to vote beginning March 15, 2013. The record date for voting at this meeting was the close of business February 4, 2013. A list of shareholders of record is available for your review.

The Board of Directors has appointed Corporate Election Services to act as judge of election. The judge of election reports that the proxies were receive from Alcoa shareholders holding approximately 793 million shares of common stock or 74% of the total common stock entitled to vote which satisfies the quorum requirements of Pennsylvania Law. Therefore this meeting is properly organized with the quorum present and we can proceed with business. The proxy committee appointed by Alcoa’s Board is here this morning to represent those shareholders who gave their proxies to the committee.

There are five items of business for this meeting. The first item is the election of three director nominees to serve for a three year term; Arthur D. Collins, Jr., Michael G. Morris and E. Stanley O'Neal. No other persons have been nominated in accordance with the company's governing documents. The nominations are now closed.

The second item of business is the ratification of PricewaterhouseCoopers as Alcoa’s independent registered public accounting firm for 2013. Representatives from PricewaterhouseCoopers are here today and I am going to ask them to stand to be recognized. Jorge Milo, Tim Ryan, [Marc Baumgarten] and Phillip Rossi. These representatives will be available to respond to any questions you may have during the question-and-answer period at the end of the meeting.

The third item of business is to approve on an advisory basis our executive compensation.

The fourth item of business is approval of the 2013 Alcoa stock incentive plan.

The last item of business is approval of amendments to our articles of incorporation and bylaws to permit the calling of special meetings including by shareholders of 25% of Alcoa’s common stock.

All items of business are now formally before the meeting. The time is 09:37 AM and I declared the polls now open for each item to be voted on today May 3, 2013. I would like to offer a ballot to any shareholder present at the meeting who wishes to vote in person. If you have already submitted your proxy you need not submit a ballot to vote at this meeting unless you wish to change your vote. If anyone needs a ballot to vote who hasn't already voted by proxy please raise your hand.

There is one hand raised, can we have a ballot provided? One more. We will wait for those ballots to be filled out and collected. Is there another hand back there? Okay. When your ballot is ready, I would appreciate it if you raise your hand again so it can be collected. Okay, one is ready right here. Are we waiting for one more? Okay, one more in the back. Okay have all ballots now been collected? Okay I believe so.

Now that we have collected all ballots, Mr. Kleinfeld, the presiding officer of the meeting will officially close the polls.

Klaus Kleinfeld

I declare the polls now closed at 9:41.

Audrey Strauss

Okay, the polls are closed and based on the preliminary report of the inspector of election all three nominees have been elected to the Board with all nominees receiving at least 85% of the votes cast. The proposal to ratify PricewaterhouseCoopers as of course independent registered public accounting firm for 2013 has been approved with approximately 98% of the votes cast in favor. Executive compensation has been approved on an advisory basis with approximately 92% of the votes cast for the proposal. The 2013 Alcoa stock incentive plan has been approved with approximately 91% of the votes cast for the proposal. The amendments to our articles of incorporation and bylaws to permit the calling of special meetings have been approved with approximately 97% of the votes cast for the proposal. We will file the final election return on Form 8K with four days of this meeting. That completes our formal business and the business portion of this meeting is adjourned.

Before we proceed to the informal portion of the meeting, I need to provide you with usual cautionary disclosure about forward-looking statements. After that we will turn to Mr. Kleinfeld’s report to shareholders. Mr. Kleinfeld’s report in today's discussion may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Alcoa’s actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to Alcoa’s Form 10-K for the year ended December 31, 2012, and other reports filed with the Securities and Exchange Commission.

In addition, we have included some non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today’s representation and on our website at www.alcoa.com on the annual meeting page at about corporate governance. Any reference in our discussion today to EBITDA means adjusted EBITDA for which we have provided calculations and reconciliations in the appendix. I will now turn the meeting over to Mr. Kleinfeld for his presentation.

[Music]

Klaus Kleinfeld

I think everyone has a different favourite part in that video, but I like it I must say looking at it. So welcome again to our Annual shareholders Meeting. So let me talk a little bit about what happened in the last year at the company and in the usual fashion, I will start with safety results. And if you look at the safety results here are the two graphs on the total recordable as well as the dark rates you see. Even though we have been on a very, very good level before, but we continue to make progress. And all of that is a work of tirelessly caring for the detail in hot summer month in Russia, in hot times in Australia and in difficult moments in other places.

So I am very, very grateful that we continue to make this progress, and one number that sticks out of my view is 79% of our facilities have not had one lost work the last year and there are very, very few places on this planet that and very few companies that can have statistics like that. We are now in a situation that our track record is 75 times better than the average US industrial firm. But we could be very happy about it but our work is not done and painfully we get reminded of that when we have a fatality and we had two fatalities last year. And you know that we have process of very thoroughly studying what happened why did that happened, and without going into the details there is again a lot of learning from that and it is a painful remainder that there is still a lot of work that needs to be done and we cannot stop caring for the detail and also standing by our collogues that sometimes get started on something and probably think that they know what they are doing but then other aspects they come into play and that others might see so that is that part.

Alcoan’s as you know and many of you have been Alcoan’s or are Alcoan’s here in the room. For us this is not just the values of the company that is the way of life, I mean these are the values that we live everyday and we know this and it feels good to be what the values based company, but it also feels good to be recognized at the outside world and also last year we were recognized and the chart would be too small to put all of the recognitions that we received all around the world on it. So we selected a few probably some of the once that stand out on reputation side again, we have been Fortune Most Admired Metal Companies. We are number one on innovation and social responsibility, and on the second item here we won the Catalyst Award for our advancement of women called Women in Hard Hats and some of you have been at the event. I must say it was a moving moment and I think it was an encouragement to continue that good work going forward. I see some nodding in the audience and I see it as an encouragement, I'm very proud of what we've done there.

Brazil again among the best 100 companies to work for in 11th consecutive year, very hard to beat 50 Most Engaged Workplaces Award and they have a long list there. On the sustainability as you know that's an important part in our business and climate change side. Dow Jones sustainability index in there for the 11th consecutive year, again very few firms that can show their statistics, [Maple Craft] ranked number two among hundreds. Cradle to Cradle certify now on the silver level. So this is great. This is great and its not just great because it feels good to be recognized from the outside, but in a way its important for all business because for us and many, many ways its important to earn our license to operate and sometimes its literally licensed to operate, very often its the license to operate being with the community having the support from the government. Therefore this is an important part also for how we basically create value. And I want to share with you one thing that I've also shared in the last year’s is the volunteerism, because for us engaging in the community again is a very personal thing and it starts with saying I want to give back to my community. We've invented this very nice thing called this Month of Service. October worldwide is Month of Service for Alcoa. Everybody in Alcoa knows that and everybody gears up for that time to put even more efforts into doing something for the community. So it ramps up to October and October is gigantic burst of activity and then we prepare and obviously there's ground swirl that goes across the whole year.

Last year we did something crazy, because the Alcoa Foundation had their 60th anniversary last year. So we said, okay, we have the year before we had 56% participation and the Alcoa Foundation team asked me to put a video together and they said well Klaus we have a target out there and the target I think was 58 or something like that and this is already a very ambitious target. I said 60th anniversary, there's no other target than 60. And that's what I put out on the video, everybody was grinding their teeth and here we are and we did it you know.

I think it was a great thing to see that. And when you look at the statistics, I mean, 78,500 trees planted, 13,500 meals served, 151,000 hours -- volunteer hours, 2,050 non-profit partners participating. When you look at the participation by region, that's the one that I get my kicks out honestly, when you look at that and when you look at places you know like China 68%, 61% in France, 63% in Russia, 55% in the US. US is traditionally the one where volunteerism has been strongest and you see what companies can do in Russia, volunteerism wasn't around because everything was taken care of by the state. And these are the values I think that we bring to places like that you know and the same thing by the way in China. So this is a very, very good movement there and all of these numbers obviously are from last year.

So let's go into the financial side of things. On the financial side of things, we set very ambitious targets at the beginning of last year, not knowing actually what environment we would be facing. We were a little more optimistic what last few would bring in also and what last year really brought, so we set those targets. And what you can see here, I mean from productivity to working capital, to capital spend, to the debt to cap ratio, not only did we match them but basically we overachieved pretty much every single one of those targets. We sat all along, positive free cash flow was our target and here we are. We not only were positive free cash flow barely or so, we made $236 million free cash flow. And we did that in spite of the environment not treating us very friendly because this is the situation you see here on the left hand side, you see the metal price in 2011 was an average of almost $2,400 and you see the metal price in 2012 was an average of $2,000. Bear in mind, every $100 for us has an impact of around $250 million less profit, that’s already after-tax profit and you see that reflected if you -- oh that's great, okay.

I go back and hope that the chart comes now, okay. You could see here and now this is a very important moment. Obviously, somebody did it on purpose to this to your imagination. This is a bridge and it shows the profit here in 2011 and then it goes through the influences, positive and negative and what you do see in front of you in our eye here is the metal’s impact, that’s one of the numbers that’s left here, the negative impact coming from the reduction of the metal price was a $1 billion. So, $1 billion less profit came purely from the metal price reduction, right and the total market impact, your currency had a little bit of positive impact last year. So we almost lost a $1 billion here.

What you do see in front of your inner eye, I am sure is all the great work that the Alcoans did, we're compensating this and basic generating a $1 billion in productivity and growth, right. So this is the hard work of all of our 60,000 plus people all around the world. Great, great job. Unfortunately, it was more than necessary because this impact was very, very harsh last year. Here you see some of these things broken down. You don’t have to use your imagination now anymore. That was enough of a test. So thank you guys for setting this up. So what you see here is the productivity numbers and the levers. And when you go to this chart, here you see that in last year we had the 1.2 billion on gross productivity basically. And in total, over the last five years, we produced more than 5.5 billion productivity, great, great job and we could only do that by using every single lever from optimizing our processes to getting better on procurement, to getting better on their overhead size, so we're reducing overhead cost.

Another one that shows us also is since the crisis as many of you know, unfortunately our environment has been as such that we have to focus on very much on cash. And when you focus on cash, you really have to look into those corners where you can most easily get it, right. And one corner where you can most easily get it is for instance on the inventory side. If you have stuff lying around there, that’s just eating, eating, eating capital you know and you can find a better way not to have this inventory, this is great and this is in way and simplified way what this chart shows.

End of 2008, we had working capital returns of 43. And by the end of last year, we had working capital returns of 24. I tell you if you had conversations with Alcoans or management and what if said, what would you have thought in 2008 where would be at the end of 2012, none of us, none of us would have ever believed that that’s possible without risking the livelihood of the company. And here we are and we have operating better than ever. Unfortunately, the bad news is we all some needed because the environment is a harsh environment.

This alone has created a $1.2 billion in additional cash and the good thing about this is, you don't have to cut into your own flesh, I mean you basically get those money for free from the outside world so to say, right and from optimizations. All of these actions have led to strengthening our balance sheet. He saw where we are and where we were in 2008, where the debt to cap ratio of 42.5, this is actually a little dangerous and we have brought that down to 34.8, which is right in our target zone.

So we have a relatively strong balance sheet and even though during this time the environment has not been very beneficial to us. All right with all that work, you could say well, but what is happening on the stock price, what is happening to the stock price and that is I tell you what that is the frustration that probably everybody here in this room has.

Where you have two curves on this slide here and this is the range of last year. The red curve describes the metal price on daily basis and the blue curve describes the closing price also on a daily basis and what you do see here is both curves go and sink. So what basically means the volatility of the metal price direct the bumps through and overwrite all the other factors of great things that are happening, happening at the company that is what is going on there.

The consequence for us is we can now, I mean sit down, worry about and look at the swing at around 7 o'clock in the morning, we typically get the first emails and those that are living here in U.S. get the first emails on the metal price and when I open it you know there is always a little worry around that and I cannot deny that there is a little emotional response to seeing that number, but that is a bad emotion in reality because we can worry about what is going on in the rest of the world but that is not productive. What we have to do and what we have decided to do let's concentrate on those things that we have on our own control. And that is why you are seeing that in spite of the difficult environment why you are seeing that on the operational side we are performing very, very well.

Okay, guys, did I do something wrong here, okay, a little bit too much creativity today. I will back to my presentation, thank you so much. So this is in fact the right slide after this. So what is happening there, in principal, the market, the aluminum market is not a bad market, I mean we see the demand growing and now I will talk about that. The demand is growing. We projected that this century will be century where aluminum demand will double and for aluminum demand to double in the century, it basically needs a 6.5% average growth rate per annum. And what you see here is, it has grown in the last years by 8%, right on average. So it’s ahead of all projections. Projections sound aggressive but in reality we are ahead of it. That happens on the physical side, there a different story what happens on the pricing side.

When you look at our end markets, the overall end market picture doesn't look that bad. Actually this is the overall the summary so to say if you all sum it up, all arrows point to green. So there is some growth, some bigger, some smaller. You have strong differences when you look at the regions, right. There are some strong differences here in different speeds compared to the regions, right. One thing that I think has been overlooked by many shareholders and that's why we are trying to put that message out much more strongly is we have used the downturn to really change our portfolio with what I just described to you before concentrating on those things that we can control and building out those businesses where we have more control overall in fate.

And you see it very nicely reflected here in this slide. Here this shows the profit structure by segment in 2003 and in 2003, 25% of the profits came from our value add businesses, the engineered products and solution business and the global rolled products business. That's different and in 2012, 71% of the profits came from those value add businesses. So in reality, we have really changed the portfolio pretty drastically, right. This is a function of three things, okay, yes, we see that there are depressed prices here, that's one factor, but we also see that we have been able to grow the value add businesses in terms of revenues as well as in terms of profitability.

Here you see the profitability of both of these groups over a period of 10 years. And what you see here is this is the global road products business and this is the EBITDA margin, EBITDA per metric ton, so basically you see that if you compare the current performance to the average 1.6 times the average performance there, so its well above where the historic norms and its even more dramatic when you go to the engineered products and solution business where its 2.4 times the 2002 level. This is what is driving the shift and it will continue to drive the shift and that's why I thought I would bring you a few slides more on this to hopefully get you as excited as we are about these opportunities and the value add side.

Our total value-add business now makes up $13.2 billion of our revenue, that's roughly 56% of the total revenues and this is a breakdown of this by segment. So most of you know Alcoa, not surprised that the aerospace sector is a large part, almost a third of this is aerospace and that's great by the way; that's very, very good because the aerospace market has a lot of nice characteristics that are highlighted up here, 11.6% end market growth, very few markets that have that and I'm talking about a period by 2015. Eight years of backlog of the big two, Boeing and Airbus so even if the economy wobbles a little bit they have eight years on their order books that they have to produce you know before they run out of stuff. Right, that's a pretty cool statistic to have, you know a very, very comfortable situation and we are very well positioned not only on the metallic planes, but given how we changed our portfolio and how we innovated we are also very well positioned on the composite planes.

We did something out of I must say originally out of accident, we said we want to do a blow up of a plane on paper, to be clear, on paper so and then cut out code everything in Alcoa blue that we offer, everything in Alcoa blue that we offer and we said deep Alcoa blue for what we offer today and light Alcoa blue for what we are offering for the future. Then I was shown this slide and I said how boring did that look and Kelly smiles because she was the one showing you that slide and then we both looked and I said that is such a cool picture because in reality it shows that Alcoa blue flies from nose to tail, right.

And also shows that the history of our industry is so important for the aviation industry. The aviation industry would not exist without our industry and the interesting thing also is more than 90% of all aluminum aerospace alloys have been developed by Alcoa. Unfortunately, not all of them are under patent today anymore, right. But that shows you the strengths that we have in this market and we have no intention to ever give that up and there is no reason why we should ever give that up.

You know, and then when you see the other statistics there, every western commercial aircraft flying today uses Alcoa fasteners. Every western commercial as well as military aircraft engine uses Alcoa castings. I will tell you what, these are things that make me very, very proud and I want to be also crystal clear, these are things that we are doing for planes; but unfortunately and that’s our growth opportunity, not every plane has all these components from Alcoa, but the target is clear with this image, right.

So let me talk about a second market here, Automotive. That’s interesting stuff happening; you say okay, why is Klaus talking about $700 million revenue segment in there and $700 million segment, that’s growing, okay. What's the growth in there? Well, we all know automotive segment is growing but it's not growing that great, right, 2% to 3%, that’s what the expert believe, 2% to 3% growth rate. But that story for us is a very different story, because we are seeing in North America that automotive is aluminizing, right, and that is driven basically by fuel efficiency and light weighting coming through that and it's driven very much by consumer demand and supported by legislation. Therefore we see a 30% to 35% growth rate from North American auto-sheet and that’s why you saw the announcements, the string of announcements, the last one yesterday and I heard that there were strong celebrations in Tennessee yesterday when we announced that we are building a new auto facility, auto-sheet facility in Tennessee and as you may remember, we are in the process of building an auto capacity in Davenport and we broke ground also for an auto capacity in Saudi Arabia end of December last year, we’ll come to that.

We did the same thing now because we liked it so much on the airplane we said let’s blow up a car, again, only on paper. So and we did this and then color coated it, what you see here it's not that mature the market than the other market is because there is more light blue parts, right. But there are very few white parts; that’s good, because the white parts we couldn’t offer, right. And there will be even lesser going forward, so this is an exciting market and we are gearing up to really use any opportunities that we get from growing into this market.

Let me also talk for a second about our upstream business, because the upstream business although they are tremendously under pressure from the metal price, but the work that has been done there, I mean totally is excellent, there is no anther word in my view than real excellence, what has happened here, we clearly see that in this market to survive and wouldn’t this market you got to come down on the cost curve, you got to be a low cost producer and that’s what we are doing, we want to come down 7 percentage points on the alumina side, 10 percentage points on the aluminum side. I am not going to go through all of the levers unless you want me to in the Q&A session.

One important thing to do that is our Saudi joint venture. The Saudi joint venture, you may remember I said that before is the lowest cost on this planet; it will set a new low cost point in smelting and refining, all right. Therefore it is critically important to give you an indication of the importance; this project alone will move Alcoa worldwide 2 percentage points down on the cost curve, 2 percentage points, this alone, so this is critically important that this works out well.

So far, it has worked out very well as you can see by these numbers here; the first phase of the smelter and rolling mill and what you see here on 12-12-12 bunch of folks were there and what did we do on that day, its obviously supposed to be a lucky moment in time, we poured the first metal there and think about this, we poured the first metal only after let me whether this works now, this is an image that was taken at the site, all right, and as you see there were some inhabitants that we had to convenience to leave the site before we could start building there. But this is a shot at the site, and I think it was not taken exactly in December 2009, but I think it was May, June 2010, May 2010 when we went to the site, we signed the contract on the 21, of December 2009 and here we are on 12-12-12 pouring the first metal.

I tell you what that was a historic moment and the project as I showed you on the last slide is doing well; so let me not talk about but also show you a video so that you can see with your own eyes and I hope that you don't have to use your imagination.

[Commercial Video]

Okay, so let me close with that and summarize. It’s very important as you all know, to stay true to our core values. We are acutely focused on offsetting the headwinds that unfortunately in the upstream market, that commodity markets brings with it. While we are continuing to grow those markets that show attractive opportunities particularly on the value add side and I believe that on the value add side we are extremely well positioned to perform, continue to perform excellently. So with that I conclude my presentation and open it up for questions.

Question-and-Answer Session

Klaus Kleinfeld

Sure, we have microphones here I guess, can we get a microphone here in the front please here, this gentleman here on the front.

Unidentified Analyst

Dave (inaudible) from Michigan, I'm a shareholder and I'm pretty familiar with aluminum and wonderful product absolutely wonderful product. But the one thing that I find is that I don't see the company pushing the fact that this product is as great as it is. A lot of things has come off like in the home industry we are like everybody is at a door and they came out with a lot of doors, they tried to replace aluminum and we are big failures. You see them on the side of the road everyday. They try to cheapen the door, put a small amount of aluminum in it and use particle board explode it out, you probably know about all that stuff. Now if you could get out to the public, how good of a product this is. Just the same as is the railroad companies are everyday they have an add on there they tell how much it cost to push this piece of metal, a ton of metal for so many miles. Well, just imagine when you make a car it’s something that’s transported, it weighs hundreds of tons and you are driving millions of miles with it. I haven't heard Alcoa come out and say how much that thing saves by that being, the difference being, what's the difference between metal, steel and aluminum, the weight and all of that thing, you are going to haul that metal, like a car today.

When I was a young kid, you got 70,000 miles on the car, you junked it. Well now, you go 250,000 miles. If you got an extra 500 to 600 pounds in that car, what's it going to cost you to run 500, 600 miles for 250,000 miles, and I don’t hear this company coming out, you got a wonderful product, you take that product, you can lay it on the ground and lay there for 20 years, it doesn’t fall apart. So it looks good, but I don't think that you are fully getting across. It’s a little bit more expensive, but it's just like the deck. You go out and you buy a deck, the guys says jeez, I bought that deck and it was a lot cheaper buying at [wood]. But then you say to them, but now you got to finish it. You got to buy some stuff and put a coat, a paint on it, and then in a few years, you got to do it again, and again and again. I got a ladder that, I am seven years old my dad bought a ladder when I was about eight years old. I got it now, it's better than any ladder its aluminum ladder. Better any ladder that you can get out there. It's a little bit heavy no matter, he paid a little bit more for that ladder, but I think if you look back and you said jeez you had that ladder for all that years. So you got a wonderful product but I don't think you are getting across all the value of paying a little bit more and out side of that...

Klaus Kleinfeld

I think you are right, and I will take this up. I know the Alcoa leadership team is listening here. We are out there with all the statistic and I could bore you, but you said it in the best possible way, it's a little bit more expensive but the saving over a lifetime totally justify that and the good news is there are some industries that get it. The American consumer on the automotive side get it now; the American producers automotive producers get it now. That’s why the automotive market is growing 30% to 35%; they understand it. We can shave off about 10% weight of a car, right with light weighting, and the equivalent of that is basically fuel efficiency, right and over a longer lifetime, and I am not even talking about the money that’s saved, but I am also talking about the environment friendliness and we can we cycle it. So you are absolutely right, the story is a fantastic story. In some markets I think we do better in getting the message out. I think on the automotive side, we are there, that’s why we now see the growth. Some markets we still haven’t gotten the message out. I mean there are markets like wheels when you talk to the truckers, I don't know, whether you have done that or so. I tell you what, when they have Alcoa wheels and you ask you tell them how much you like their wheels, you will find a raving fan. I have not met one trucker that’s not the moment I approached them and say, hey I like your wheels, I like the look of your truck, they will immediately start talking about the beauty of the wheels, they get it. But not everybody gets it and I think it's a good reminder that we have to continuously work on that. Thanks.

Unidentified Speaker

My name is David Katz, I am a shareholder and you pointed in your nice presentation about how the stock is languished between 8 and 9 for a quite while now. My question is, are there any plans for share buyback? And secondly my next question is what would be the difference in cost if the headquarters were move from New York back to Pittsburgh?

Klaus Kleinfeld

Good, so let me address that one by one. So on the share buyback program, we look at the entirety of how to use our funds, right and we look at how to create shareholder value in the best possible way. And there are obviously multiple ways how to create shareholder value, pay extra dividends or share buyback are some of those. This is how discussions that we are having, the Board is having every time we are sitting together and we make our decision, it’s not that this is not on our agenda, all right, so we evaluate as we go, right.

So the second thing there is this miss out here in Pittsburgh but only by those that don't know Alcoa as though we have large headquarter in New York. Let me clarify this, once and forever hopefully, because I think we got to get this discussion behind us because I don't feel that internally it’s a discussion any more. We have finally about I would say 70 people that are in the headquarter in New York, so it’s a very small office with 70 people, all right, and this 70 people are basically the main leadership of Alcoa and then we have about 3100 people here in Pittsburgh, all right so this is the relationship, all right. So I understand that there is some emotional rounded, but the very fact to be headquartered in New York gives client a number of advantages and they more than justify on the cost side, every time we have the discussion about bringing an executive in rotation to the US, the first discussion I have with the person is, is there an opportunity to educate my kids, are there international schools, I mean where can I send my kids because I cannot do this, if I don't have an opportunity, if I disrupt the growing up of my kids, the answer in New York is very, very simple, they usually don't even ask that because there are so many internationals who was that even though they don't know are we going to stay for three, five years in New York you know, that's a very easy thing you know and the other thing is, is there an opportunity for my partner to find a job. And these two things I mean are very, very important on the tail end side and the other aspect that those of you that live here know that in terms of logistics, the logistics unfortunately I mean have not massively improved. In fact, they have decreased you know. So it’s quite painful sometimes, I mean, to have logistics figure out here from Pittsburgh and we are working on improving that. It was the logistics providers. So that's that.

Unidentified Speaker

My name is [Jim Robinson], I'm a District Director at United Steel Workers and I chair Steel Workers negotiations with Alcoa here in the US. I just want to say Klaus on behalf of the union in the US, we appreciate your attendance at our meeting yesterday and positive discussion we had. We are also very supportive of the investments going out around the US and Alcoa facilities, that's an excellent thing for both the company and the future of those facilities. We also have here a group of about 50 people as we do every year from representing Alcoa workers and union leaders from around the world. We have nine different countries represented as well. We have the President of European works Council and therefore in his portfolio he has representation for Alcoa employees throughout Europe.

We had a good discussion yesterday. There's a number of issues, the two probably most important issues that we raised. We appreciate your attention to them. One is the occasional conflicts we have here in the US over Employee Freedom of Association, you committed to continued dialogue on that and we are going to take you up on that. We also appreciate and I say this on a regular basis. This is a company that does walk to walk when it comes to safety. I can tell you horror stories of companies that I deal with other than Alcoa that don't value human life the way this company does and it’s very appreciated. But as you said obviously, there's always more to do and we have some ideas about that and some things we could do together to improve safety throughout the world and we will be contacting you on a more global basis to talk about that issue. But I do want to say we appreciate your attention yesterday and we look forward to continuing to have it.

Klaus Kleinfeld

Well, thank you and on the safety side, I mean the discussion was very good I thought and I meant it if there are some then let's not wait, I mean let's do this rather tomorrow. So when I talk to Kevin Anton who is somewhere in the room, Kevin there you know he will reach out and Bob will make sure that you connect to the right people that had ideas. And also whatever you see there and as I said, this is something we can only do together, only do together and I mean let's also make sure that the stop I have still in my pocket here there was stop work coin you know that you make good use of it, right. So whenever you see it, I'm speaking to all of you right there. Very good, any other comments, questions please. There's microphone right there.

Unidentified Speaker

[Dishan] shareholder from Philadelphia. Aluminum is an energy intensive product and I guess that's why you are in Saudi Arabia. We are becoming blooming energy in the United States. Will there be an impact on the plants of Alcoa in the future? And the second issue, I read something about an another mineral anorthosite.

Klaus Kleinfeld

What is that?

Unidentified Speaker

Anorthosite, it's like bauxite. You can make aluminum from it, well, I guess you haven't.

Klaus Kleinfeld

Product that can make aluminum?

Unidentified Speaker

No, it's mineral where we may make aluminum from. Anyone?

Klaus Kleinfeld

We will look into. Ray Kilmer is our Chief Technology Officer. If he doesn’t know he needs to talk to you, but on your first question, on the first question, you are right. You are absolutely right, this has an impact. I call it a god’s gift to America in all of the shale gas and the shale oil find and you are absolutely right, it has an impact already today and the impact is too forward. It has a direct impact because it has brought the natural gas price in the U.S. down in an enormous way. We have one refinery here in the U.S. and point comfort in Texas and we use to, this was a high cost refinery and we use to run it as a swing plan because swing plan. So we rammed it up when the price was high and we ramped it down when the price was low, very difficult to do this was a big piece like the refinery, very complicated to do that and we have been struggling with this.

This thing now runs full out because the cost of gas because it's heat, heat in a refinery that we need, the cost of gas has come down so much that it is much, much low on the cost curve than many other of the refineries, right. So this is the direct impact that it has already today and the indirect impact that it has also today is you probably notice as I feel that you are following also the information that come out around Alcoa that in the last years, we have been signing a lot of new energy contracts here in the U.S. and we have been able to lock up a lot of good energy for long time to 20 to 30 years. So last one that we did was a couple of weeks ago where we confirmed the Massena Upstate New York transaction was just 30 year, 30 year deal at very competitive power rates and it's all hydropower, now you would say what does that have to do with gas or with shale gas, it is indirectly linked because the utilities before were all wanting to sell spot, so they were all that nobody wanted to sign long term power contract anymore.

Now that they are suddenly seeing that the market is changing, they are faced with the reality that they might not have a buyer for their electricity. So they are looking for like in the old days for what they call anchor tenant and given the high energy intensity that we have, we are such a anchor tenants, so we can provide a baseload of demand so do say, and this has become of a value again. So these are the two things how we are profiting from it and you probably heard me being out there to talk about shale gas in the more public discussion and caution the aspect of the discussion around giving away export licenses.

In a time when we don't really know how much is in the ground, we don't want to create an environment where we sign export licenses and ship the stuff and we find out that there probably isn’t enough in the ground. So that’s where we are on this, okay. Thank you for the question. Any other comments or questions?

With that, meeting is adjourned. Thank you very much for coming.

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