Rio Tinto PLC. (RIO) finally took extreme measures to wriggle out of union pressures by locking out close to 755 workers and further announcing a reduction of one-third production from the Alma aluminum smelter.
Management had been continually making efforts in order to reach a fair consensus in the best interests of the employees, thereby trying to settle disputes with its union since October 4, 2011. However, due to the workers’ intransigence, at the union contract termination date, December 31, 2011, the company decided to show them the door when they rejected its final proposal.
Even though the Alma smelter unit is smaller in size than Rio’s other Australian production centers, around 0.43 million tons of aluminum were produced here in 2010 which accounted for about 11% of Rio’s total production that year.
Rio recently announced its 2011 third quarter operations review, whereby aluminum production increased 2% year over year, amounting to about 1 million ton. It would be interesting to see how the current grim situation at the Alma smelter affects the aluminum production this quarter.
Rio Tinto currently faces strong competition from Anglo American PLC, BHP Billiton Ltd. (BHP) and Vale S.A. (VALE).
Operational since 1873 and headquartered in London, United Kingdom, Rio Tinto PLC is a subsidiary of Rio Tinto Group. The company deals with the exploring, mining and processing of earth’s mineral resources, thereby producing metals and minerals such as alumina, aluminum, bauxite, diamonds, gold and many others. It has operations worldwide with a current employee database of 77,000.
We currently have a Neutral recommendation on Rio Tinto PLC. The stock currently carries a Zacks #5 Rank, which translates into a short-term rating of Strong Sell.
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