Arconic's Competitiveness

Global Rolled Products (GRP)
GRP is one of the leaders in many of the aluminum flat rolled products markets in which it participates, including aerospace, automotive, brazing sheet, commercial transportation, industrial markets and regional specialties. However, much like other Arconic businesses, GRP is subject to substantial and intense competition in all of its markets.

While GRP participates in markets where Arconic believes the Company has a significant competitive advantage due to customer intimacy, advanced manufacturing capability and/or differentiated products, in certain cases, the Company’s competitors are capable of making products similar to Arconic’s. The Company continuously works to maintain and enhance its competitive advantage through innovation: new alloys such as Arconic’s new aerospace alloys, new products such as the Company’s 5 layer brazing products and break-through processes such as Arconic Micromill™ technology.

GRP comprises AAP, BCI and MPS, each serving defined segments. Some of the markets are worldwide and some are more regionally focused. Participation in these segments by GRP’s competitors varies. For example, Novelis is the largest flat rolled products producer but does not participate in the aerospace market. On the other hand, Constellium participates in all major market segments including aerospace, brazing, industrial, commercial transportation and packaging. Granges participates only in the brazing sheet market. Other GRP competitors include Aleris, AMAG, Kaiser, Kobe, Nanshan, and UACJ.

Additionally, there are a number of new competitors emerging, particularly in China and other developing economies. For example, in the brazing business, the number of viable competitors has doubled over a five-year period. Arconic expects that this competitive pressure will continue and increase in the future as customers seek to globalize their supply bases in order to reduce costs. The Company continually monitors and plans for these new emerging players.

Summary of Major Competitors for GRP (both AAP and BCI)

Constellium (The Netherlands)

Novelis

UACJ (Japan)

Aleris

Hydro (Norway)

Nanshan (China)

Granges (Sweden)

Kobe (Japan)

Engineered Products and Solutions (EPS)
EPS’s business units—APP, AFSR, AFE and ATEP —are subject to substantial and intense competition in the markets they serve. Although Arconic believes its advanced technology, manufacturing processes and experience provide advantages to Arconic’s customers, such as high quality and superior mechanical properties that meet the Company’s customers’ most stringent requirements, many of the products Arconic makes can be produced by competitors using similar types of manufacturing processes (e.g., closed die forgings) as well as alternative forms of manufacturing (e.g., machining out of plate). Despite intense competition, Arconic continues as a market leader in most of its principal markets. Several factors, including Arconic’s legacy of technical innovation, state-of-the-art capabilities, engaged employees and long-standing customer relationships, enable the Company to maintain its competitive position.

In the investment castings business served by APP (Nickel, Titanium and Aluminum Investment Castings), Arconic’s principal competitor is Precision Cast Parts Corp. (PCC). PCC produces superalloy, titanium and aluminum investment castings principally for the aerospace and industrial gas turbine markets. In addition, Doncasters Group Ltd. (UK) produces superalloy investment castings for engine applications, and Pacific Cast Technologies (a subsidiary of Allegheny Technologies, Inc. (ATI)) and Selmet both manufacture titanium investment castings for jet engine and airframe applications and Consolidated Precision Products (CPP) produces superalloy and aluminum investment castings principally for the aerospace and industrial gas turbine (IGT) markets. Several of Arconic’s largest customers have captive superalloy furnaces for producing airfoil investment castings for their own use. Many other companies around the world also produce superalloy, titanium, and aluminum investment castings, and some of these companies currently compete with Arconic in the aerospace and other markets, while others are capable of competing with the Company should they choose to do so.

In the fasteners markets served by AFSR, the two principal competitors in the aerospace fastener business are PCC and Lisi Aerospace (France), with additional competition from Consolidated Aerospace Manufacturing-“CAM”, and TriMas. These companies together offer a comprehensive array of products in a broad range of materials (including superalloys) that directly compete in AFSR’s key segments including airframe, aero-engine, aerospace, and IGT. As aerospace original equipment manufacturers (OEMs) seek to balance product supply across large and small suppliers, they view smaller and emerging competition as essential in their efforts to manage sourcing costs.

In the rings products market served by AFSR, Arconic’s principal competitor is PCC, especially through their Carlton facility. PCC produces superalloy, titanium and aluminum rings principally for the aerospace market. In addition, Forgital (France and Italy) produces rings in multiple materials, and Frisa (Mexico) manufactures rings in superalloys and titanium. Several smaller competitors around the world compete with Arconic in specific markets, depending on the equipment capability and metallurgical expertise.

In the forged products market served by AFE, Arconic’s largest competitors are PCC, Weber Metals (a division of Otto Fuchs KG in Germany), Aubert & Duval (a group member of Eramet in France), VSMPO-AVISMA (Russia) and Ladish Co. (a subsidiary of ATI). In the extruded products market served by AFE, the Company faces increased competition from emerging international companies, such as Nanshan (China), as customers seek lower cost sources of production.
International competition in the investment casting, fastener, ring and forging markets may also increase in the future as a result of strategic alliances among engine OEMs, aero-structure prime contractors, and overseas companies, especially in developing markets, particularly where “offset” or “local content” requirements create purchase obligations with respect to products manufactured in or directed to a particular country.

In the titanium milled and engineered products market served by ATEP, Arconic’s largest competitors are PCC (through its TiMet division), ATI, and VSMPO-AVISMA (Russia). ATEP also competes in the highly fragmented machining market with numerous small players throughout North America and Europe. In the highly competitive milled products space, cost and service are the differentiators, and there is continual effort to reduce prices for input raw material. For engineered products, such as the ATEP-supplied 787 seat tracks for Boeing, advanced capabilities as well as an efficient supply chain are the key differentiators.
Summary of Major Competitors:
APP: Superalloy, Titanium and Aluminum Investment Castings

PCC

Doncasters Group Ltd. (UK)

Pacific Cast Technologies (a subsidiary of ATI)

CPP

Selmet

AFSR:
Fasteners

Lisi Aerospace (France)

PCC

Consolidated Aerospace Manufacturing-“CAM”

TriMas

Rings

PCC

Forgital (Italy, France)

Frisa (Mexico)

AFE:
Nickel, Titanium, Steel and Aluminum Forged Products

PCC

Weber Metals (a subsidiary of Otto Fuchs KG in Germany).

Aubert & Duval (a group member of Eramet in France)

VSMPO-AVISMA (Russia)

Ladish Co. (a subsidiary of ATI)

Aluminum Extruded Products

Universal Alloys Corporation

Kaiser Aluminum

Constellium (The Netherlands)

Nanshan (China)

ATEP:

TiMet (a division of PCC)

ATI

VSMPO-AVISMA (Russia)

Transportation and Construction Solutions (TCS)
In the forged aluminum wheels business, AWTP competes in commercial transportation, under the product brand name Alcoa® Wheels, for the major regions that it serves (Americas, Europe, Japan, China, and Australia). AWTP competes against steel wheels, as well as aluminum. Its larger competitors are Accuride Corporation, Nippon Steel & Sumitomo Metal Corporation, Zhejiang Dicastal Hongxin Technology Co. Ltd, and Speedline (member of the Ronal Group). In recent years, AWTP has seen an increase in the number of aluminum wheel suppliers (both forged and cast aluminum wheels) from China, Taiwan, and South Korea attempting to penetrate the commercial transportation market.

BCS is a manufacturer and marketer of aluminum architectural systems and products in North America and with a growing presence in Europe, Asia and the Middle East. In North America, BCS primarily competes in the nonresidential building segment. In Europe, Asia and the Middle East, it competes in both the residential and the nonresidential building segments. BCS competes with regional and local players in the architectural systems and more global companies in the products markets. BCS’s competitive advantage is the cornerstone to its strong brand, innovative products, customer intimacy and technical services. Over the past decade, the regional competitors, primarily in North America, have narrowed the product portfolio and technical services advantages. However, BCS has maintained its competitive advantage through innovative products like highly energy-efficient high-thermal products and differentiated services. BCS revenues are derived mainly from the retail, office, education and healthcare building segments.

BCS is organized into two business segments: architectural systems and architectural products. The primary product categories in architectural systems are storefront, framing and entrances (SEF), curtain walls, and windows. In the SEF and curtain wall businesses, BCS competes with competitors like Apogee, YKK, EFCO, Oldcastle, Schüco, Hydro/SAPA and Reynaers in their aluminum framing systems business. The architectural products business is more global and is primarily served by subsidiaries of larger companies like Alpolic (Mitsubishi Corporation), Alucobond (Schweiter Technologies) and Novelis (Aditya Birla Group). The competitive landscape in the architectural systems market has been relatively stable since the mid-2000s, with the major competitors in North America and Europe still operating in their markets, despite some industry consolidation in North America during the late 2000s.

LAE participates in two distinct segments: building and construction and industrial. In the building and construction market, LAE develops and markets aluminum architectural systems for both commercial and residential buildings. LAE’s product portfolio provides extensive coverage of all types of buildings, from more complex projects requiring special engineering to multi-family residential buildings. In the industrial business market, LAE manufactures and sells soft alloy extruded profiles and solutions, mainly for the automotive, consumer goods, machinery and equipment segments. Overall, LAE holds a strong presence in Brazil, where competition is very fragmented, composed mainly of small local extruders and a few multinationals such as CBA (Votorantim Group) and SAPA.
Summary of Major Competitors:
AWTP:

Accuride Corporation

Nippon Steel & Sumitomo Metal Corporation (Japan)

Zhejiang Dicastal Hongxin Technology Co. Ltd (China)

Speedline (member of the Ronal Group in Switzerland)

BCS:

North America Systems – Apogee, Oldcastle, YKK and EFCO

North America Products – Alpolic, Alucobond and Alucoil

Europe Systems - Schüco (Germany), Hydro/SAPA (Norway), Reynaers (Belgium) and Corialis (Belgium)

Europe Products – Alucobond, Alucoil, Euramax and Novelis

LAE:

Belmetal (Brazil)

CBA (Brazil)

SAPA (Norway)

Aluk (Brazil)