Lots of people were bemoaning the Alcoa quarter last week, mostly because of the earnings miss. That was, alas, the totally wrong takeaway of the situation. What mattered is the inexorable and inevitable mix toward more value-added products couple with lower-cost aluminum. It's a two-fold process and it is going along well as the company is becoming relentless in its pursuit of becoming one of the world's lowest-cost producers.
Before the much-maligned Klaus Kleinfeld, it was one of the highest. Kleinfeld's making all of the tough moves, closing old smelters that had sentimental attachment to the previous management, always reminding us how non-business-like previous management was. When the we get even the slightest inflection, whether it comes from Ford's (F) decision to go lightweight or Europe having a tick up for more than a month in car registrations, then you are going to see a bottom line that will shock you. You just haven't seen an ounce of leverage yet for the model and that's because the lack of pickup in sales. But there's no doubt in my mind that every region in the world, save China, is doing better right now than six months ago and that means when inventories are finally worked off and new, lower-cost facilities are in place, the amount of money that will be made off of a slight increase in sales could be shocking.