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Obama Turns to Alcoa as Backdrop for Manufacturing Message

President Barack Obama said manufacturing can lead the nation’s recovery from the recession even as changes in technology and the global economy have dislocated workers and forced companies to adapt.

At Alcoa Inc. (AA)’s Davenport Works plant in eastern Iowa, which makes components for the next generation of jumbo jets, Obama highlighted the technology success of a company that still faces obstacles: slow global growth, high energy prices and a weak domestic construction industry.

“For better or for worse, our generation has seen more than our fair share of economic change,” Obama told plant workers and local officials in Riverdale, Iowa. Some of those changes “have also caused a whole lot of pain.”

Obama said recovering from the deepest recession since the 1930s and adapting to new technology and tougher competition will take time and government support for education and research. “There’s no silver bullet to reverse a decade of economic challenges,” he said.

Obama’s stop in Iowa, a state that launched his bid for the Democratic presidential nomination almost four years ago, marks his fourth trip in the U.S. in a month to promote his economic policies, this time in a state that will be crucial to his re- election effort in 2012. Over the past four weeks, Obama has hit Ohio, Pennsylvania and North Carolina, all swing states that he won in 2008 and that his campaign is seeking to hold next year.

With the 2012 race likely to turn on voters’ economic concerns, the Obama administration is looking for ways to help U.S. manufacturing to compete globally and create jobs domestically.

Growth Projections

Alcoa, the largest U.S. aluminum producer and typically the first company in Dow Jones Industrial Average to report its quarterly earnings, is confronting the same forces that have caused the Federal Reserve to lower its growth projections for the U.S. economy.

“The global slowdown and the uncertainty in what’s going on in Europe is not going to help matters at Alcoa,” said Alan Lancz, president of the Alan B. Lancz & Associates investment advisory firm in Toledo, Ohio.

“Alcoa is a good barometer,” he said. “If there’s a slowdown or lesser expectations on consensus, that will bode across the entire cyclical spectrum as far as global economic growth goes.”

Disruptions

Manufacturing, which drove the recovery as growing overseas economies propelled U.S. exports, has cooled in the aftermath of Japan’s earthquake in March and as raw-material costs climbed. The Institute for Supply Management’s factory index fell to 51.8 this month from 53.5 in May, according to the median estimate of 63 economists in a Bloomberg News survey. Readings above 50 signal expansion.

Obama used today’s Alcoa visit to highlight the ability of U.S. companies to compete globally. The Riverdale facility, which opened in 1948, employs 2,000 people and generates about 25 percent of its revenue through exports, according to the company’s website. It is the hub of Alcoa’s $3 billion aerospace business. Some of the alloys rolled in Davenport gird the wings of the Airbus A380 and Boeing Co. (BA)’s 777.

As his administration grapples with how to respond to a national 9.1 percent unemployment rate, Obama has sought to put a focus on the country’s manufacturing sector and what his administration is doing to strengthen it.

Seeking a Boost

Earlier this month, at the Durham, North Carolina, headquarters of Cree Inc., a manufacturer of energy-efficient lighting, Obama hailed an initiative to train 10,000 engineers a year. He endorsed a shorter-term goal of creating jobs in construction by making buildings more energy efficient. Last week in Pittsburgh, he announced a $500 million initiative to join companies and universities in an effort to speed up technology development. Alcoa will join that project, Obama said today.

“This roadshow is about a lot more than Alcoa,” said Stephen Massocca, managing director at Wedbush Securities in San Francisco. “It’s about trying to show concern for the fact that we are looking at a whole host of indicators over the last few months that have weakened when they should be strengthening.”

Alcoa employs 59,000 workers, down from 107,000 in December 2007, before the recession began. That reduction includes divestitures and 21,545 job cuts, according to Bloomberg data.

Global Demand

The company’s first-quarter profits beat analysts’ estimates after aluminum prices advanced on improving global demand for the metal. The company reiterated its forecast that global aluminum demand will grow 12 percent this year.

Alcoa rose 27 cents to $15.54 at 2:23 p.m. in New York Stock Exchange composite trading. Shares have climbed 39 percent in the 12 months ending yesterday.

Global aluminum output of 40.8 million tons last year exceeded consumption by about 1 million tons, according to Bloomberg data. Warehouses monitored by the London Metal Exchange held 4.58 million tons of inventories as of today, compared with an average of about 1.43 million in the past 10 years. There were 4.64 million tons on Jan. 21, 2010, the highest since at least 1978.

The plant uses an alloy developed in Alcoa’s research and development center in Pennsylvania, Ron Bloom, Obama’s manufacturing adviser, said in a briefing yesterday. The metal is shaped in Iowa and finished in Kansas before it is “exported all over the world,” Bloom said.

“You have a company that’s committed to innovation, that’s committed to a highly skilled workforce, that’s committed to the future,” he said in a conference call with reporters. “And that’s exactly what we think can happen in manufacturing with a partnership with government.”

To contact the reporter on this story: Hans Nichols in Washington at hnichols2@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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