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Hydro plans to divest Automotive Components

November 13, 2006, 08:00 CET

Hydro intends to divest its Automotive Components operations as part of the company's strategy to reduce engagement in downstream aluminium while investing in the repositioning of metal production operations.

“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,” said Eivind Reiten, Hydro’s President and Chief Executive Officer.

The intention to divest the Automotive operations is based on a thorough portfolio analysis following the announcement last December of a strategic shift in Hydro’s aluminium business.

Automotive Components comprises the business units Castings and Structures, and counts more than 3,600 employees in Europe and North America. Key product areas include cast aluminium engine blocks and cylinder heads, as well as extruded aluminium crash management components such as bumper beams.

Hydro will continue to supply aluminium tubing for heat transfer systems, and extruded and rolled aluminium products for other automotive applications.

“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,” Reiten says.

He adds that Hydro’s main strengths as an aluminium company are in the area of primary aluminium production and production of a variety of extruded products, including a strong position in building systems.

Last month, Hydro announced that it would leave the magnesium business, closing a large plant in Becancour, Canada, and selling operations in China and Germany. Several other steps have been taken this year to increase profitability in the Aluminium Products business area, including a process to sell the extrusion plant in Ellenville, New York, major restructuring of the Extrusion operations in the United Kingdom and divestment of Extrusion Tools at Karmøy, Norway.