Four years after it was split from Alcoa, Arconic itself is dividing into two companies: Arconic focused on rolled aluminum products and a new aerospace-focused operation, Howmet Aerospace.
The new Howmet Aerospace will focus on jet engine components, aerospace and industrial fasteners, and structural parts for aerospace and defense markets. In addition, it will produce forged aluminum wheels for commercial transportation.
The breakup was pushed by investors who wanted to see increased returns. Following Arconic’s formation in 2016, the company struggled, posting almost $1 billion in losses since its inception. In late 2017, the company appointed a new CEO, former GE manager Chip Blankenship, to lead the firm. His tenure was cut short in early 2019 when John Plant was named CEO – marking the fourth person to occupy that office since 2017. The management change followed the collapse of a $15 billion deal to sell the company to Apollo and Elliott Management. Disputes over pension obligations and liabilities associated with the building unit’s flammable cladding panels, which were involved in the deadly 2017 Grenfell Tower fire in London, were key stumbling blocks, according to news reports.
The new management team moved quickly and in February 2019 initiated a restructuring, focusing the firm on two segments: Engineered Products & Forgings, which produces aircraft and gas turbine components, and Global Rolled Products, which manufactures sheet and plate products. This was quickly followed with a plan to split the firm into two publicly traded operations along those lines.
While the aerospace operations have been performing well, the ongoing issues with Boeing’s 737 MAX have begun to ripple through suppliers. With the grounding expected to continue in the near term, layoffs and work slowdowns are expected to impact the new Howmet Aerospace, making its first year a challenging one.
Despite the uncertainty surrounding the MAX program and its impact, Arconic plans on completing its breakup by April 1.