The company's president and CEO, Klaus Kleinfeld, said that falling aluminum prices and weakening demand were to blame. With the IMF predicting dramatic slowdowns in economic growth all around the world through 2009, these conditions can hardly be expected to improve for the next four or five quarters. Although, as Kleinfeld noted, "easing energy prices and a stronger US dollar" should, to some extent, counter these conditions. However, even Alcoa expects problems going forward.

Alcoa, according to Kleinfeld, is taking steps now to "conserve cash and maximize profitability through very adverse economic conditions." These steps include postponing all non-essential capital expenditures, reducing manufacturing capacity and workforce, and the immediate suspension of the company's share repurchase program. In the short term, that's going to add even more downward pressure on the stock price, but it's a smart step for the company's long-term prospects. As a producer of basic raw materials, Alcoa's outlook is completely dependent upon the strength of global growth. By taking these steps now, Alcoa is telling the world the same thing that the IMF said in a staff report earlier this week.

The IMF report said "many advanced economies are now close to recession, while emerging economies are also slowing rapidly," and "the global economy is entering a major downturn." The US economy in particular, they said, may grow only 0.1% for all of 2009. If they are right, not only Alcoa, but all of us would be well served to take steps to prepare right now. The IMF report says that of the G7 countries Canada will do best with growth of 1.2%, though many countries, including Britain and Italy, will see negative growth for the year. Although China should see consistent growth, it will be slower than they have experienced in recent years as exports suffer. Taken altogether, the IMF predictions strongly suggest that raw materials, like Alcoa's aluminum should see even more substantial weakness in prices, and demand.

For the consumer, the one bright note to this forecast would be that oil prices should be under the same downward pressure and, with them, gasoline prices should moderate. The effect of that can be seen already with the price for regular unleaded falling below $3.00 per gallon in some places around the country for the first time in a long time.