Is It Safe? Alcoa's Mettle Tested Abroad

As a kicker for Alcoa, President Barack Obama's ambitious mileage requirements for cars will mandate the use of lightweight materials, which will result in additional use of aluminum in car construction.

Alcoa has taken forceful measures to assure its survival until the economy picks up. The company bolstered its balance sheet with $1.4 billion in new shares and convertible notes. Despite its depressing first-quarter financial results, Alcoa ended the period with $1.1 billion in cash, partly by slashing its quarterly dividend to 3 cents a share from 17 cents.

The company also made more conventional cost cuts such as trimming capital spending, reducing headcount, freezing salaries and dumping less-promising ventures.

With 47% of its sales outside the U.S., Alcoa's revenue is geographically diversified. The company stands to gain if the recent weakness in the U.S. dollar continues.

However, with only 15% of its sales in Asia-Pacific, Alcoa is at a disadvantage in that fast-growing region, which includes manufacturers and consumers in China. Larger rivals BHP Billiton(BHP Quote) and Rio Tinto(RTP Quote) dominate the area. And Rio Tinto became the world's largest aluminum producer when it outbid Alcoa for Alcan in 1997. Alcoa's challenge is to take its rivals head-on in emerging markets, where its fate will be met.

TheStreet.com Ratings gives Alcoa a C-minus, which equates with a weak "hold" recommendation.