Hydro Plans to Divest Automotive Components Business

Strategy is to focus on upstream aluminum production

November 13, 2006 — Hydro Aluminium, which has boasted of being the world's largest independent producer of automotive engine blocks, plans to sell off its Automotive Components operations in a strategy to reduce its involvement in downstream manufacturing while investing in and repositioning its metal production operations. The Oslo, Norway-based conglomerate reports it conducted a thorough portfolio analysis since last December, when it indicated it would change strategies in its aluminum segment to emphasize its primary metal production.

“When Hydro decides to sell a business it’s because we believe the operations and employees will have a better home with a company that sees greater potential for value creation in that business than we do,” stated president and CEO Eivind Reiten.

The announcement comes just about a month after Hydro decided to close its primary magnesium smelter in Quebec, a division that is largely dependent on the automotive diecasting market. And, it follows the announcement that Nemak S.A., another large supplier of aluminum engine blocks, intends to buy a series of plants from rival TK Aluminium.

Hydro's Automotive Components business includes operations that produce castings and automotive structures. tructures, with over 3,600 employees in Europe and North America. In addition to cast aluminum engine blocks and cylinder heads it produces extruded aluminum crash management components (e.g., bumper beams). Hydro intends to maintain its aluminum tubing operations which produce heat-transfer system, as well as extruded and rolled aluminum products for other automotive applications.

Reiten explained: “As car manufacturers are fighting decreasing margins, opting for products made by cheaper metals or materials, Hydro has not been able to ensure satisfactory profitability within Automotive Structures. The Castings business unit is healthy but should be further developed by an owner that is better positioned to succeed in the competitive auto industry.”

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