Alcan

Implementation Program: 2001-2002

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Background

  • In the late 1990s, Alcan underwent a number of efficiency improvement efforts that resulted in more than $600M in annual operating profit improvement, yet its stock performance was lagging that of its peers
  • In 2001, Travis Engen an Alcan director who was known for having delivered exceptional performance as CEO of ITT Industries was appointed Chief Executive
  • Mr. Engen began implementing the same systematic approach to improving Alcan’s performance that he has employed at ITT

Actions:

  • Established a corporate-wide objective of delivering superior shareholder returns relative to industry peers and translated that objective into specific economic profit growth goals for the corporation
  • Tasked line-management with developing a granular understanding of where and why economic profits were being created or consumed in each business unit and identifying opportunities to improve economic profit growth
  • Established a corporate-wide value improvement agenda and an 18 month timeline of implementing the overall change program
  • Spun off the fabrication division into a new publicly traded company
  • Significantly increased both organic and M&A investment in upstream mining and smelting and downstream packaging
  • Altered the customer focus and product mix of all business units
  • Restructured company into 23 independent business units with cash flow responsibility.
  • Changed the corporation sourcing, facility loading and distribution configuration and centralized purchasing and improved risk management
  • Aligned and standardized the company’s strategic, resource allocation, and budgeting decision processes and linked management compensation to economic profit growth

Results: (subsequent 5 year performance)

  • 24% compounded total annual shareholder returns vs. 5% for peers