ALUMINUM CO OF AMERICA - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

/ x / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE
REQUIRED) FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

Commission File Number 1-3610

ALUMINUM COMPANY OF AMERICA
(Exact name of registrant as specified in its charter)

Pennsylvania 25-0317820
(State of incorporation) (I.R.S. Employer Identification No.)

425 Sixth Avenue, Alcoa Building,
Pittsburgh, Pennsylvania 152191850
(Address of principal executive offices) (Zip Code)

Registrant's telephone number--area code 412

Investor Relations------------553-3042
Office of the Secretary-------553-4707

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------

Common Stock, New York Stock Exchange
par value $1.00

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes / x / No .

Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / x /

As of March 7, 1995 there were 178,894,715 shares of
common stock, par value $1.00, of the Registrant outstanding.
The aggregate market value of such shares, other than shares
held by persons who may be deemed affiliates of the Regis-
trant, was approximately $6,655 million.

Documents incorporated by reference.

Parts I and II of this Form 10-K incorporate by reference
certain information from the registrant's 1994 Annual Report
to Shareholders. Part III of this Form 10-K incorporates by
reference the registrant's Proxy Statement dated March 14,
1995, except for the performance graph and Compensation
Committee Report.

1

ALUMINUM COMPANY OF AMERICA

Unless the context otherwise requires, Alcoa or the
Company means Aluminum Company of America and all subsi-
diaries consolidated for the purposes of its financial
statements.

PART I

Item 1. Business.

Alcoa is the world's largest integrated aluminum
company, engaged in the production and sale of primary
aluminum and semifabricated and finished aluminum products.
It was formed in 1888 under the laws of the Commonwealth of
Pennsylvania. Alcoa produces and sells alumina and alumina
based chemicals, a variety of other finished products, and
components and systems for a multitude of applications.
These products are used primarily by packaging, transporta-
tion (including aerospace, automotive, rail and shipping),
building and industrial customers worldwide. Alcoa has
operating and sales locations in 26 countries.

Discussion of Alcoa's operations and properties by its
three business segments follows.

The Alumina and Chemicals segment includes the
production and sale of bauxite, alumina and alumina-based
chemicals, and related transportation services.

The Aluminum Processing segment includes the production
and sale of molten metal, ingot, and aluminum products that
are flatrolled, engineered or finished. Also included are
power, transportation and other services.

The Non-Aluminum Products segment includes the produc-
tion and sale of electrical, ceramic, plastic, vinyl, and
composite materials products, manufacturing equipment, gold,
magnesium and steel and titanium forgings.

Most aluminum facilities located in the United States
(U.S.) are owned by the parent company. Alcoa of Australia
Limited (AofA) and Alcoa Aluminio S.A. (Aluminio) in Brazil
are the two largest operating subsidiaries.

Alcoa serves a variety of customers in a number of
markets. Consolidated revenues from these markets are:

(dollars in millions)
Revenues by Market 1994 1993 1992
- ------------------ ---- ---- ----

Packaging 2,830 $2,606 $2,803
Alumina and Chemicals 1,494 1,437 1,422
Transportation 1,671 1,397 1,526
Building and Construction 1,391 1,299 1,190
Distributor and Other 1,570 1,274 1,215
Aluminum Ingot 948 1,042 1,336
------ ------ ------
Total Sales and Operating
Revenues $9,904 $9,055 $9,492
====== ====== ======

Segment and geographic area financial information are
presented in Note P to the Financial Statements.

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In December 1994 and January 1995, Alcoa and Western
Mining Corporation Holdings Limited (WMC) entered into a
multistep transaction to restructure and combine the owner
ship of their respective world-wide bauxite, alumina and
alumina-based chemicals businesses and investments into a
group of companies (Enterprise) owned 60% by Alcoa and 40%
by WMC, except that WMC's ownership interest in AofA
equals 39.25%. WMC is a mining company headquartered
in Melbourne, Australia, and is generally involved in
mining nickel, gold, copper and uranium.

In connection with the establishment of the Enterprise,
WMC sold to Alcoa 9% of its interests in AofA (thereby
bringing Alcoa's ownership in AofA to 60% and reducing WMC's
ownership to 39.25%) and made a net payment of $312.9 million
that is subject to final upward and downward adjustments in
certain circumstances. The payment is net of a $121.8
million loan to WMC in January 1995 by one of the entities of
the Enterprise. The conclusion of the restructuring and
combination of certain businesses and investments in Brazil
between Alcoa, WMC and third party investors in Aluminio is
expected to occur late in the first quarter of 1995.

The Enterprise is a series of affiliated operating
entities and assets comprised of the following bauxite,
alumina and alumina-based chemicals interests and other
necessary but ancillary facilities that will be run as
part of an integrated operation at certain locations
included within the Enterprise:

1. 99.25% ownership interest in AofA, including
its aluminum smelting and fabricating operations;

2. All of Alcoa's interests in bauxite mining,
alumina refining and aluminum smelting operations at
Point Comfort, Texas (refining only); Halco Mining,
Inc. in Guinea (mining only); Jamaica (mining and
refining); and Suriname (mining, refining and
smelting);

3. All of Alcoa's bauxite and alumina shipping
operations;

4. All of Alcoa's alumina-based chemicals businesses
in the U.S., Australia, Japan, the Netherlands, Germany,
Singapore and India; and

5. 35% of Aluminio's interest in the Alumar alumina
refinery at Sao Luis, Brazil (Alumar Refinery) and in
Mineracao Rio do Norte S.A. (MRN) (mining only).

A five-member Strategic Council, three members of
which are appointed by Alcoa and two by WMC, will provide
counsel and direction to the Enterprise. Alcoa will
provide operating management for all of the affiliated
operating entities. Alcoa and WMC will both have the
right to be represented on the Board of Directors of each
Enterprise entity, but there have been no changes made to
the Board, the management or the structure of AofA.

Competition

The markets for most aluminum products are highly
competitive. Price, quality and service are the principal
compe titive factors in most of these markets. Where
aluminum products compete with other materials, the diverse
characteristics of aluminum are also a significant factor,
particularly its light weight and recyclability. The compe-
titive conditions are discussed later for each of the
Company's major product classes.

The Company continues to examine all aspects of its
operations and activities and redesign them where necessary
to enhance effectiveness and achieve cost reductions. Alcoa
believes that its competitive position is enhanced by its
improved processes, extensive facilities and willingness and
ability to commit capital where necessary to meet growth in
important markets, and by the capability of its employees.
Research and development, and an increased emphasis on full
utilization of technology,

3

have led to improved product quality and production tech-
niques, new product development and cost control.

The dissolution of the Soviet Union and the lack of a
mechanism to successfully integrate its economy with market
economies significantly contributed to a global oversupply
of aluminum in recent years. Prior to 1991 former Soviet
aluminum producers primarily served internal markets which
weakened substantially after the collapse of the Soviet
Union, and aluminum produced at former Soviet smelters
began to be exported. These exports caused an imbalance
in demand and supply and resulted in severe downward pressure
on aluminum prices.

In late 1993, discussions among the governments of
six major primary aluminum-producing nations were initiated
to address the global aluminum supply situation. A multi-
government accord was reached among Australia, Canada, the
European Union (EU), Norway, Russia and the U.S. in January
1994 under which the Russian industry would reduce its annual
aluminum exports for up to two years, the EU would refrain
from renewing import quotas on Russian ingot when the quotas
expired at the end of February 1994, and certain of the
participating governments would create a fund to assist in
the modernization of the Russian industry.

In response to market conditions, in 1994 Alcoa
reduced primary aluminum production by 100,000 mt per
year at the Company's smelters at Rockdale, Texas and
Wenatchee, Washington. These reductions were in
addition to Alcoa's indefinite curtailments during 1993
of 310,000 mt of U.S. smelting production. AofA also
reduced production in 1994 by 25,000 mt at its Point
Henry smelter in Geelong, Australia. The joint venture
smelter in Portland, State of Victoria, in which AofA
owns a 45% interest, completed a reduction of 26,000 mt.
Also in 1994 the Company's subsidiary in Suriname
(Suralco) completed a reduction of 3,000 mt.

Other Risk Factors

In addition to the risks inherent in the Company's
worldwide business and operations, the Company is
exposed generally to market, financial, political and
economic risks.

Commodity Risks

Alcoa is a leading global producer of aluminum ingot
and aluminum fabricated products. Aluminum ingot is an
interna tionally priced, sourced and traded commodity.
The principal trading market for ingot is the London
Metal Exchange (LME). Alcoa participates in this market
by buying and selling forward portions of its aluminum
requirements and output.

In 1993, when world metal prices reached an all-time
low, Alcoa temporarily idled 310,000 mt of its primary
aluminum production. Further reductions in early 1994
brought Alcoa's total worldwide idled capacity to
450,000 mt. See "Competition" above.

For purposes of risk assessment, Alcoa divides its
operations into four regions: U.S., Pacific, Other
Americas and Europe. The Pacific, principally
Australia, and the Other Americas, principally Brazil,
are in net long metal positions and, from time to time,
may sell production forward. Europe has no smelting
operations controlled by Alcoa and, accordingly, is net
short and may purchase forward positions from time to
time. At the present time, forward purchase activity
within these three regions is not material.

In 1994 the Company had entered into longer-term
contracts with a variety of customers in the U.S. for
the supply of approximately 1,500,000 mt of aluminum
products over the next several years.

As a hedge against the economic risk of higher prices
for metal needs associated with these contracts, Alcoa
entered into long positions using principally futures
and option contracts. At December

4

31, 1994, these contracts totaled approximately 1,400,000 mt.
The contracts limit the unfavorable effect of price
increases on metal purchases and likewise limit the
favorable effect from price declines. The futures and
option contracts are with creditworthy counterparties
and are further supported by cash, treasury bills or
irrevocable letters of credit issued by carefully chosen
banks, as appropriate.

For financial accounting purposes, the gains and
losses on the hedging contracts are reflected in
earnings concurrent with the hedged costs. The cash
flows from these contracts are classified in a manner
consistent with the underlying nature of the
transactions.

The volatility of aluminum market prices can produce
significant fluctuations in the periodic mark-to-market
measurement of the futures and option contracts.
Focusing only on that valuation is meaningless because
the effect of price changes on future hedged metal
purchases will approximately equal and offset the mark-
to-market valuation of the contract position. Alcoa
intends to close out the hedging contracts at the time
it purchases the metal from third parties, thus creating
the right economic match both in time and price. The
deferred gains on the hedging contracts at December 31,
1994 are expected to offset the increase in the price of
the purchased metal.

The expiration dates of the call options and the
delivery dates of the futures contracts do not always
coincide exactly with the dates on which Alcoa is
required to purchase metal in order to perform under its
customer agreements. Accordingly, the Company
anticipates rolling forward some of its futures and
option positions. This may result in significant cash
inflows if the hedging contracts are "in-the-money" at
the time they are rolled forward. Conversely, there
could be significant cash outflows if metal prices fall
below the price of contracts being rolled forward.

In late 1994 Alcoa implemented a program to protect
the unrealized gains that result from the increase in metal
prices. Approximately 10% of its hedge position was
protected at the end of 1994 through the purchase of
options from highly rated financial institutions. The
maximum risk on the option contracts is the premiums
paid.

In addition, Alcoa had 14,000 mt of LME contracts out
standing at year-end 1994 that cover fixed-price
commitments to supply customers with metal from internal
sources. Accounting convention requires that these
contracts be marked-to-market.

Alcoa also purchases other commodities, such as
natural gas and copper, for its operations and enters
into contracts to eliminate volatility in the prices of
such products. None of these contracts are material.

Financial Risk

Alcoa is subject to exposure to fluctuations in
foreign currencies. As a matter of policy, Alcoa enters
into foreign currency exchange contracts, including
forwards and options, to manage its transactional
exposure to changes in currency exchange rates.
To keep financing costs as low as possible, Alcoa uses
interest rate swaps to maintain a balance between
fixed and floating rate debt.

Risk Management

All of the aluminum and other commodity contracts,
as well as the various types of financial instruments,
are straightforward. They are primarily entered into
for the purpose of removing uncertainty and volatility,
and principally cover underlying exposures. Alcoa's
commodity and derivative activities are subject to the
management, direction and control of its Strategic Risk
Management Committee. The committee is composed of the
Chief Executive Officer, the Chief Financial Officer and
other officers and

5

employees that the Chief Executive Officer may select from
time to time. The committee reports to the Board of
Directors at each meeting on the scope of Alcoa's activities
and programs.

In 1994 Alcoa tested its policies regarding its
derivatives and commodities trading activities against the
recom mendations of the "Group of 30." A clarified
policy was approved by the Board. The "Group of 30"
was a global derivatives study group formed to
help dealers and users better manage risks and issues
associated with derivative activities. It was composed of
worldwide industry representatives, bankers, central
bankers and academics whose recommendations included
issues related to the role of senior management (including
the board of directors), authorization, control and
disclosure of derivatives. For additional information on
financial instruments, see Note R to the Financial
Statements.

Major Interests Outside the United States

Alcoa International Holdings Company (AIHC), a subsi-
diary, holds most of the Company's investments in Australia,
Hungary and Norway, nonEnterprise investments in Japan and
the Netherlands, and several wholly owned subsidiaries that
act as sales representatives and distributors outside the
U.S. for products produced by various Alcoa operations
not included within the Enterprise. In 1988 AIHC issued
$250 million of voting preferred stock, $50 million of
which was redeemed in 1994.

AofA, owned 60% by AIHC since the establishment of
the Enterprise, operates integrated aluminum facilities
in Australia, including mining, refining, smelting and
fabricating facilities. More than half of AofA's 1994
revenues were derived from alumina, and the balance was
derived principally from primary aluminum, rigid
container sheet (RCS) and gold.

Alcoa Brazil Holdings Company (ABHC) holds Alcoa's
59% interest in Aluminio, an integrated aluminum
producer in Brazil. Aluminio operates mining, refining,
smelting and fabricating facilities at various locations
in Brazil. Approximately 21% of Aluminio's 1994 revenues
were derived from primary aluminum, and exports accounted
for approximately one fourth of its revenues.

In connection with the establishment of the
Enterprise, during the first quarter of 1995, Abalco
S.A. (Abalco) in Brazil, 60% owned by ABHC and 40% owned
by WMC, will acquire 35% of Aluminio's 54% and 13.2%
interests in the Alumar Refinery and MRN, respectively,
thus obtaining effective ownership of 18.9% in the
Alumar Refinery and 4.6% in MRN.

Alcoa Alumina & Chemicals, L.L.C. (owned 60% by
Alcoa and 40% by WMC) holds all of the Company's
bauxite, alumina and industrial chemicals investments in
Guinea, India, Japan, Singapore and the U.S. and, with
Alcoa Caribbean Alumina Holdings, L.L.C. (also owned 60%
by Alcoa and 40% by WMC), holds all of the Company's
bauxite and alumina operations in Jamaica and the bauxite,
alumina and smelting operations in Suriname.

Alumina and Chemicals Segment

Bauxite, aluminum's principal raw material, is
refined into alumina through a chemical process and is
then smelted into primary aluminum. Approximately one
half of the Company's alumina production in 1994 was
sold to third parties. The Company sells alumina-based
chemicals to customers in a broad spectrum of industries
for use in refractories, ceramics, abrasives, chemicals
processing and other specialty applications.

Bauxite

Most of the bauxite mined and alumina produced by
the Company, except by AofA, is further processed into
aluminum. All of the Company's bauxite interests are now
included in the Enterprise with

6

the exception of Alcoa's bauxite mines in Arkansas, and
Aluminio's 8.6% interest in MRN and its bauxite mines in
Pocos de Caldas, Brazil.

The Company has long-term contracts to purchase bauxite
mined by a partially-owned entity in the Republic of Guinea
which is now included among the investments of the Enter-
prise. Alcoa negotiated new agreements in 1994 to replace
the contracts scheduled to expire in 1995. The new agree-
ments expire after 2011. This bauxite services most of the
requirements of the Point Comfort, Texas alumina refinery.
Suralco mines bauxite in Suriname under rights which expire
after the year 2000. Suralco also holds a 26% minority
interest in a bauxite mining joint venture managed by the
majority owner, a Billiton affiliate formerly of the Royal
Dutch/Shell Group which was acquired in 1994 by Gencor
Limited of South Africa (Gencor). Bauxite from both mining
operations serves Suralco's share of the refinery in Suriname
referred to below.

AofA's bauxite mineral leases expire in 2003. Renewal
options allow AofA to extend the leases until 2045. The
natural gas requirements of the refineries are supplied
primarily under a contract with the parties comprising the
North West Shelf Gas Joint Venture. The contract expires in
2005 and imposes minimum purchase requirements.

Bauxite mining rights in Jamaica expire after the year
2020. These rights are owned by the joint venture with the
government of Jamaica referred to in the next section.

Alumina

Alumina, a commodity, is sold principally from
operations in Australia, Jamaica and Suriname. Most of the
alumina supply contracts are negotiated on the basis of
agreed volumes over a multi-year time period to assure a
continuous supply of alumina to the smelters which receive
the alumina. Most alumina is sold under contracts where
prices are negotiated periodically or are based on formulas
related to aluminum ingot market prices or to production
costs. An imbalance of alumina demand and supply has
resulted in declining alumina prices.

AofA is the world's largest and one of the lowest-cost
producers of alumina. Its three alumina plants, located in
Kwinana, Pinjarra and Wagerup in Western Australia, have in
the aggregate an annual rated capacity of approximately
6.4 million mt. Most of AofA's alumina is sold under supply
contracts to a number of customers worldwide.

Suralco owns 55% of the 1.6 million mt per year alumina
refinery in Paranam, Suriname and operates the plant. An
affiliate of Gencor holds the remaining 45%.

An Alcoa subsidiary and a corporation owned by the
government of Jamaica are equal participants in a joint
venture, managed by the subsidiary, that owns an alumina
refinery in Clarendon Parish, Jamaica. Annual alumina
capacity at the Clarendon refinery will be increased
from 800,000 to approximately 1,000,000 mt in the next
several years.

Aluminio is the operator of the Alumar Consortium
(Alumar), a costsharing and production-sharing venture
which owns a large refining and smelting project near the
northern coastal city of Sao Luis, Brazil. The Alumar
Refinery has an annual capacity of approximately
1,000,000 mt, and is owned 35.1% by Aluminio, 36% by an
affiliate of Gencor, 18.9% by Abalco and 10% by an
affiliate of Alcan Aluminium Limited (Alcan). A majority
of the alumina production is consumed at the smelter.

Aluminio holds an 8.6% interest and Abalco holds a
4.6% interest in MRN, a mining company which is jointly
owned by affiliates of Alcan, Companhia Brasileira de
Aluminio, Companhia Vale do Rio Doce, Gencor, Norsk Hydro
and Reynolds Metals Company. Aluminio purchases bauxite
from MRN under a long-term supply contract.

7

At Pocos de Caldas, Brazil, Aluminio mines bauxite
and operates a refinery which produces alumina, primarily
for its nearby smelter.

Industrial Chemicals

Alcoa sells industrial chemicals to customers in a
broad spectrum of markets for use in refractories, ceramics,
abrasive chemicals processing and other specialty applica-
tions. A variety of industrial chemicals, principally
alumina based chemicals, are produced or processed at plants
located in Mobile, Alabama; Bauxite, Arkansas; Ft. Meade,
Florida; Dalton, Georgia; Lake Charles and Vidalia,
Louisiana; Leetsdale, Pennsylvania; Nashville, Tennessee;
Point Comfort, Texas; Kwinana, Australia; Pocos de Caldas and
Salto, Brazil; Ludwigshafen, Germany; Iwakuni and Naoetsu,
Japan; and Moerdijk and Rotterdam, the Netherlands.
Aluminum fluoride, used in aluminum smelting, is produced
from fluorspar or fluosilicic acid at Point Comfort and
Ft. Meade. With the exception of the plants located in
Pocos de Caldas and Salto, all of these facilities are now
part of the Enterprise.

In 1993 the Company and The Associated Cement Companies
Ltd. of Bombay, India formed a joint venture to import,
process and market tabular alumina and alumina-based chemi-
cals for the refractory and ceramic industries in India.
The venture expects to complete construction of its
processing plant in Falta, India in 1995.

In September 1994, Aluminio acquired the assets of a
fused alumina plant in Salto, Brazil from Carborundum.

Aluminum Processing Segment

Revenues and shipments for the principal classes of
products in the aluminum processing segment are as follows:

(dollars in millions)
1994 1993 1992
---- ---- ----
Revenues:
Aluminum ingot $ 920 $1,042 $1,336
Flat-rolled products 3,201 2,974 3,189
Engineered products 1,882 1,528 1,527
Other aluminum products 473 430 465
------ ------ -----
Total $6,476 $5,974 $6,517
====== ====== ======

(mt in thousands)
Shipments:
Aluminum ingot 655 841 1,023
Flat-rolled products 1,381 1,271 1,323
Engineered products 433 379 353
Other aluminum products 82 89 98
----- ----- -----
Total 2,551 2,580 2,797
===== ===== =====

Aluminum Ingot

The Company smelts primary aluminum from alumina
obtained principally from the alumina refineries discussed
earlier. Smelters are located at Warrick, Indiana; Massena,
New York; Badin, North Carolina; Alcoa, Tennessee; Rockdale,
Texas; Wenatchee, Washington; Point Henry and Portland,
Australia; Pocos de Caldas and Sao Luis, Brazil; and Paranam,
Suriname. The Company's smelting operations in Australia and
Paranam, Suriname have been included in the Enterprise.
Alcoa's consolidated annual rated primary aluminum capacity
is approximately 1.9 million mt. When operating

8

at capacity, the Company's smelters more than satisfy the
primary aluminum requirements of the Company's fabricating
operations. Purchases of aluminum scrap (principally used
beverage cans), supplemented by purchases of ingot when
necessary, satisfy any additional aluminum requirements.
Most of the Company's primary aluminum production in 1994
was delivered to other Alcoa operations for alloying
and/or further fabricating.

The joint venture smelter at Portland, Victoria, with
an annual rated capacity of 320,000 mt, is owned 45% by AofA,
25% by the State of Victoria, 10% by the First National
Resource Trust, 10% by the China International Trust and
Investment Corporation, and 10% by Marubeni Aluminium
Australia Pty., Ltd. (Portland Smelter Participants). A
subsidiary of AofA operates the smelter. Each Portland
Smelter Participant is required to contribute to the cost of
operations and construction in proportion to its interests in
the venture and is entitled to its proportionate share of the
output. Alumina is supplied by AofA. The Portland site can
accommodate additional smelting capacity.

The Alumar Consortium aluminum smelter at Sao Luis,
Brazil has an annual rated capacity of 328,000 mt. Aluminio
receives about 54% of the primary aluminum production.

The Company utilizes electric power, natural gas and
other forms of energy in its refining, smelting and
processing operations. Aluminum is produced from alumina by
an electrolytic process requiring large amounts of electric
power. Electric power accounts over time for approximately
25% of the Company's primary aluminum costs. The Company
generates approximately 40% of the power used at its smelters
worldwide. Most firm power purchase contracts tie prices to
aluminum prices or to prices based on various indices.

Over 40% of the power for the Point Henry smelter is
generated by AofA using its extensive brown coal deposits.
The balance of the power, and power for the Portland,
Victoria smelter, is available under contracts with the State
Electricity Commission of Victoria. Power prices are tied by
formula to aluminum prices. The State Government of Victoria
has announced its desire to renegotiate the power contract
for the Point Henry and Portland smelters, but, after
discussions, confirmed that the existing base contracts will
be honored. Discussions are continuing on other aspects of
power supply to the smelters, such as the terms on which
additional power may be made available.

Electric power for Alumar's Sao Luis smelter is
purchased from the government-controlled power grid in Brazil
at a small discount from the applicable industrial tariff
price and is protected by a cap based on the LME price of
aluminum. Aluminio's Pocos de Caldas smelter purchases firm
and interruptible power from the government controlled
electric utility. Aluminio has prepaid all of the Pocos de
Caldas facility's electricity requirements through January 1,
1996.

Over 50% of the power requirements for Alcoa's U.S.
smelters is generated by the Company and the remainder is
purchased from others under long-term contracts. Less than
10% of the self-generated power results from the Company's
entitlement to a fixed percentage of the output from a hydro
electric power facility located in the northwestern United
States.

The Company generates substantially all of the power
used at its Warrick smelter using coal reserves near the
smelter that should satisfy requirements through the late
1990s. Lignite is used to generate power for the Rockdale,
Texas smelter. Company-owned generating units supply about
half of the total requirements and the balance is purchased
from a dedicated power plant under a contract which expires
not earlier than 2013. See "Environmental" below.

In connection with the electric power generated for the
aluminum smelters at Alcoa, Tennessee and Badin, North
Carolina, two subsidiaries of the Company own and operate
hydroelectric facilities subject to Federal Energy Regulatory
Commission licenses effective until 2005 and 2008,
respectively. For the Tennessee plant, the Company also
purchases firm and interruptible power from the Tennessee
Valley Authority under a contract which expires in 2000. For
the Badin plant, the Company purchases

9

additional power under an evergreen contract providing for
specified periods of notice before termination by either
party.

The purchased power contract for the Massena smelter
expires not earlier than 2003 but may be terminated by the
Company with one year's notice.

Alcoa has two principal power contracts for its
Wenatchee smelter. The contract from the power output
entitlement referred to above expires in 2011. The contract
with Bonneville Power Administration expires in 2001 and
includes 25% interruptible power. Power restrictions may
occur when precipitation is below normal. Beginning in 1995,
a portion of the power supplied under the entitlement
contract will be replaced by power purchased from the local
public utility district. Additional power also may be
purchased from the district.

Although not included in the revenues by market or
revenues and shipments tables above or in the rated primary
aluminum capacity figure above, the Company reports equity
earnings from its interest in two primary aluminum smelters
in Norway. Elkem Aluminium ANS, 50% owned by Norsk Alcoa
A/S, a subsidiary, is a partnership that owns and operates
the smelters.

Flat-Rolled Products

The Company's flat-rolled products serve three principal
markets: light gauge sheet products serve principally the
packaging market, and sheet and plate products serve
principally the transportation and building and construction
markets.

Alcoa employs its own sales force for most products
sold in the packaging market. Most of the packaging revenues
in 1994 were derived from RCS sold to can companies to make
beverage and food cans, and can ends. The number of RCS
customers in the U.S. is relatively small, in part because
the number of can companies has been shrinking. Use of
aluminum beverage cans continues to increase, particularly
in Asia, Europe and South America, where per capita consump-
tion remains relatively low. Aluminum foil and non-RCS
packaging sheet are sold principally in the packaging
markets.

Aluminum's diverse characteristics, particularly its
light weight and recyclability, are significant factors in
packaging markets where alternatives such as steel, plastic
and glass are competitive materials. Leadership in the
packaging markets is maintained by improving processes and
facilities, as well as by providing research and technical
support to customers.

Light gauge aluminum sheet and foil products are manu-
factured at several locations. RCS is produced at Warrick,
Indiana; Alcoa, Tennessee; Point Henry, Australia; Moka,
Japan (a joint venture facility); and Swansea, Wales. Light
gauge sheet and foil are produced at Lebanon, Pennsylvania
and foil also is produced at Davenport, Iowa. Light gauge
sheet, foil products and laminated evaporator panels are
manufactured by Aluminio at Recife, Brazil.

In early 1995 the Company and Shanghai Aluminum Fabri-
cation Plant (SAFP) agreed to form a joint venture company
to acquire and operate SAFP's existing aluminum foil and
foil laminate production facility in Shanghai, China. The
joint venture company will be owned 60% by Alcoa and 40% by
SAFP. The facilities currently produce approximately
8,500 mt of aluminum foil per year. The joint venture is
expected to commence operations at the end of March 1995,
following receipt of all necessary Chinese government
approvals.

Used aluminum beverage cans are an important source
of metal for RCS. The cost of used beverage cans declined
in 1993 and in early 1994 as primary aluminum prices dropped
but rebounded thereafter. Recycling aluminum conserves raw
materials, reduces litter and saves energy about 95% of the
energy needed to produce aluminum from bauxite. Also,
recycling capacity costs much less than

10

new primary aluminum capacity. Can recycling or remelt
facilities are located at or near Alcoa's Indiana and
Tennessee plants.

The Company has a joint venture with Kobe Steel, Ltd.
(Kobe) in Japan. The venture, KSL Alcoa Aluminum Company,
Ltd. (KAAL), began commercial operations from its newly
constructed cold rolling mill at Moka, Japan in 1993. It
manufactures and sells RCS in Japan and other Asian
countries. AIHC holds a 50% interest in KAAL. Alcoa
supplies aluminum to the joint venture.

Sheet and plate products principally serve aerospace,
automotive, lithographic, railroad, ship building, building
and construction, defense and other industrial and consumer
markets. The Company maintains its own sales forces for most
of these products. Differentiation of material properties,
price and service are significant competitive factors.
Aluminum's diverse characteristics are important in these
markets, where competitive materials include steel and
plastics for automotive and building applications; magnesium,
titanium, composites and plastics for aerospace and defense
applications; and wood and vinyl in building and construction
applications.

The Company's largest sheet and plate plant is located
at Davenport, Iowa. It produces products requiring special
alloying, heat treating and other processing, some of which
are unique or proprietary. The Company serves European
sheet and plate markets through a distribution center opened
in Paal, Belgium during late 1993.

Alcoa continues to develop alloys and products for
aerospace applications, such as new aluminum alloys for
application in the Boeing 777 aircraft. A research and
development effort also has resulted in the commercial
development of a series of aluminum and aluminum-lithium
alloys which offer significant weight savings over
traditional materials for aerospace and defense applications.

The Company and Kobe also have two joint venture
companies, one in the U.S. and one in Japan, to serve the
transportation industry. The initial emphasis of these
companies is on expanding the use of aluminum sheet
products in passenger cars and light trucks.

In late 1992 AIHC acquired a 50.1% interest in Kofem
Kft., a subsidiary of the government-owned Hungarian Alumi-
nium Industrial Corporation (Hungalu). The venture, Alcoa
Kofem Kft. (A-K), produces common alloy flat and coiled
sheet, soft alloy extrusions and end products for the
building, construction, food and agricultural markets in
central and western Europe. A-K will invest up to $146
million, including part of AIHC's initial investment, over a
period of five years for product quality and environmental
and safety upgrades at the A-K facility. Alcoa is providing
technological and operational expertise to A-K.

Engineered Products

Engineered products principally include extrusion and
tube, wire, rod and bar, forgings, castings, aluminum
building products, aluminum memory disk blanks and other
products which are sold in a wide range of markets, but
principally in the transportation market.

Aluminum extrusions and tube are produced principally
at five U.S. locations. The Chandler, Arizona plant produces
hard alloy extrusions and tube; the Lafayette, Indiana plant
produces a broad range of common and hard alloy extrusions
and tube; the Baltimore, Maryland plant produces large press
extrusions; and plants at Tifton, Georgia and Delhi,
Louisiana produce common alloy extrusions. In 1994, the
Company announced the shutdown of the hard alloy extrusion
and tube and forgings facilities at its Vernon, California
plant following rejection of its proposal for union contract
concessions, however, it continues to produce cast aluminum
plate at the plant.

In late 1993 Alcoa and VAW Aluminium AG (VAW) formed a
joint venture to produce and market high-strength aluminum
extrusions, tube and rod to serve principally European
transportation and

11

defense markets. An Alcoa subsidiary owns 60% and VAW owns
40% of the venture which is called Alcoa VAW Hannover
Presswerk GmbH & Co. KG and is located in Hannover, Germany.

Alcoa's Delhi facility is supplying Toyota Motor Company
(Toyota) with extruded aluminum front and rear bumpers for
the 1995 Toyota Avalon to be assembled at Georgetown,
Kentucky. The bumpers were jointly designed by Alcoa and
Toyota.

The Company also produces extrusions in the Netherlands.
See "Other Aluminum Products" below. A 50-50 limited
partnership formed with Kobe in 1991 to manufacture and
market aluminum tube for photoreceptors for North American
markets ceased manufacturing operations in early 1994 and was
dissolved in late 1994.

Alcoa Construction Products produces and markets resi-
dential aluminum siding and other aluminum building products.
These products are sold principally to distributors and
jobbers.

Aluminum forgings are produced at Cleveland, Ohio; and
Bologne, France. Forgings are sold principally in the
aerospace, defense and transportation markets. Forged
aluminum wheels for truck, bus and automotive markets are
produced at Cleveland, Ohio.

During the first quarter of 1995 the Company formed a
joint venture with a subsidiary of CMI International, Inc.
to produce cast aluminum automotive parts. The Company
holds a 50% interest in the venture called A-CMI.

Mechanical-grade redraw rod, wire and cold-finished
rod and bar are produced at Massena, New York and are sold
to distributors and customers for a variety of applications
in the building and transportation markets.

Aluminum extruded products are manufactured by a sub-
sidiary of Aluminio in Argentina and at several Aluminio
locations in Brazil. Aluminio also produces aluminum
electrical cables at its Pocos de Caldas plant.

Other Aluminum Products

Alcoa Automotive Structures GmbH was formed in 1991
to produce aluminum components and sub-assemblies for
aluminum automotive spaceframes. Aluminum spaceframes
represent a significant departure from the traditional
method and material used to manufacture primary auto
body structures. In 1993 Alcoa completed construction
and began operating a unique multi-million dollar plant
in Soest, Germany to supply aluminum spaceframe products
to its first customer, Audi AG. In 1994 Audi began
marketing its new A8 luxury sedan, the first automobile
to utilize a complete aluminum spaceframe body structure.
The aluminum body structure of the A8 is a result of a
cooperation between Alcoa and Audi that began in 1981, and
is constructed from components and subassemblies that are
or will be produced by Alcoa. Alcoa continues to cooperate
with several automobile manufacturers in Europe, North
America and Japan to develop new automotive applications for
aluminum products.

In February 1995 Alcoa announced plans to build a plant
in Northwood, Ohio, near Toledo, to manufacture aluminum
structural assemblies for the automotive industry.

Aluminio produces aluminum truck and van bodies in Sao
Paulo, Brazil.

Alcoa produces aluminum closures for bottles at
Richmond, Indiana; Worms, Germany; Nogi and Ichikawa, Japan;
and near Barcelona, Spain.

12

The Company sells aluminum scrap and produces and
markets aluminum paste, particles, flakes and atomized
powder.

Subsidiaries of Alcoa Nederland Holding B.V. (ANH)
produce extrusions, common alloy sheet products and a
variety of finished products for the building industry,
such as aluminum windows, doors and aluminum ceiling
systems, as well as products for the agricultural
industry such as automated greenhouse systems.

Alutodo de Mexico, S.A. de C.V., a subsidiary, buys
and sells aluminum and aluminum products through distribution
centers at several locations in Mexico.

Non Aluminum Products Segment

Alcoa produces plastic closures for bottles at Craw-
fordsville, Indiana; Olive Branch, Mississippi; Buenos
Aires, Argentina; Sao Paulo, Brazil; Santiago, Chile;
Tianjin, China; Bogota, Colombia; Tellig, Germany;
Szekesfehervar, Hungary; Nogi and Ichikawa, Japan;
Saltillo, Mexico; and near Barcelona, Spain. The Company
operates a plastic closures decorating facility at Lima,
Peru and expects to start up plastic closures and PET
injection and blow molding facilities at Lima in 1995.
Aluminio developed technology for and now produces PET
preforms and finished PET bottles at several plant and
customer sites in Brazil and Argentina. Pre-forms and
bottles are also made at Saltillo, Mexico.

In 1994 the Company and Zepf Technologies USA Inc.
formed Alcoa Zepf, L.L.C, a joint venture company 60%
controlled by the Company, which manufactures rapid
change over and quick-change bottle control parts for the
beverage industry. Alcoa also participates in a joint
venture with Al Zayani Investments W.L.L. of Bahrain,
known as Gulf Closures W.L.L., that manufactures plastic
beverage container closures for markets in the Middle East.
Alcoa's worldwide closure businesses are coordinated from
Indianapolis, Indiana. The use of plastic closures has
surpassed that of aluminum closures for beverage containers
in the U.S. and is gaining momentum in other countries.

The Company manufactures packaging equipment and
machinery, principally for producing and decorating metal
cans and can ends. In addition, the Company manufactures
a line of equipment for applying plastic or aluminum
closures to beverage containers. Alcoa also owns a
minority interest in a company which sells food packaging
machinery that fills and seals metal and multi-layered
polymer and paper containers.

Alcoa Fujikura Ltd. (AFL), owned 51% by Alcoa and
49% by Fujikura Ltd. of Japan, produces and markets
automotive electrical distribution systems (EDS), as well
as fiber optic products and systems for selected electric
utilities and telecommunications markets. AFL is a Q-1
supplier and recently received the Ford Motor Company TQE
Award. AFL is now supplying EDS to Subaru of America, Inc.
(in the U.S.), Auto Alliance, Inc. (Mazda-Ford joint venture)
and PACCAR Inc. In 1994 AFL acquired a 90% interest in
Michels GmbH & Co. KG, a manufacturer of EDS for automobiles,
appliances and farm equipment with three plants in Germany
and five plants in Hungary. AFL's Stribel group of companies
are European manufacturers of electromechanical and
electronic components for the European automotive market.

Alcoa Construction Product's principal product for
building and construction markets is vinyl siding. Other
non-aluminum building products include vinyl windows,
window lineal systems, shutters and building accessories,
and wood windows and patio doors.

Norcold and Stolle Products Divisions manufacture
recreational vehicle refrigerators, auto parts and appliance
control panels.

A subsidiary, Alcoa Electronic Packaging, Inc. (AEP),
produces ceramic packages used to hold integrated circuits
for electronic equipment. During 1994 AEP increased ship-
ments of several parts to a

13

key customer and added two additional customers. AEP
currently is working with several potential customers to
broaden its market base in 1995. Production capacity is
being increased to respond to these opportunities.

Alcoa Composites, Inc., a subsidiary, principally
designs and manufactures composite parts and structures for
aerospace and transportation applications.

Facilities to recover gold from AofA's mining leases
in Western Australia were constructed, and mined gold first
poured, in 1988. Production has been declining since 1990,
and the gold deposit is expected to be depleted by 1997.

Magnesium is produced by Northwest Alloys, Inc., a
wholly-owned subsidiary in Addy, Washington (NWA), from
minerals in the area owned by NWA. Alcoa uses magnesium
for certain aluminum alloys. Recycling is also a source
of aluminum-magnesium alloys. Responding to world magnesium
market conditions NWA increased magnesium production during
1994. Third party sales of magnesium are continuing.

Titanium and steel forgings are produced at Cleveland,
Ohio and Bologne, France and are sold principally in aero-
space markets.

Aluminio produces copper electrical cables at its
Pocos de Caldas and Guarulhos, Brazil plants. It also owns
and operates a chain of retail construction materials
outlets in Brazil.

Alcoa's wholly owned subsidiaries own and develop
luxury residential/resort communities in South Carolina
and Florida; the remaining properties are being actively
marketed.

Research and Development

The Company, a technological leader in the aluminum
industry, engages in research and development (R&D) programs
which include basic and applied research and process and
product development. The research activities are princi-
pally conducted at Alcoa Technical Center (ATC), near
Pittsburgh, Pennsylvania. Several subsidiaries and divisions
conduct their own R&D programs, as do many plants. Expendi-
tures for such activities were $126 million in 1994, $130
million in 1993 and $212 million in 1992. Most of the
decrease in R&D expenditures since 1992 is related to program
reductions at ATC. Substantially all R&D activities are
funded by the Company and its various units. The Company's
strategy has been to focus its R&D expenditures on specific
programs related to existing businesses, which will lead to
lower R&D expenditures in 1995.

Environmental

Alcoa's Environmental Policy confirms its commitment
to operate worldwide in a manner which protects the
environment and the health of employees and of the citizens
of the communities where the Company has an impact.

The Company engages in a continuing effort to develop
and implement modern technology and policies to meet environ-
mental objectives. Approximately $45 million was spent
during 1994 for new or expanded facilities for environmental
control. Capital expenditures for such facilities will
approximate $60 million in 1995. The costs of operating
these facilities are not included in these figures.
Remediation expenses being incurred by the Company are
increasing at many of its facilities and at certain sites
involved in proceedings under the Comprehensive Environ-
mental Response, Compensation and Liability Act of 1980
(CERCLA or Superfund) and other sites. See Environmental
Matters on page 23 in the Annual Report to Shareholders,
and Item 3 - "Legal Proceedings" below.

14

Alcoa's operations, like those of others in
manufacturing industries, have in recent years become
subject to increasingly stringent legislation and
regulations to protect human health and the environment.
This trend is expected to continue. Compliance with new
laws, regulations or policies could require substantial
expenditures by the Company in addition to those
referenced above.

Environmental requirements also may affect the
marketing of certain products manufactured by the
Company. For example, legislation imposing deposits on
beverage containers including aluminum cans has been
passed in a number of states and is being considered
elsewhere. Federal and state regulations, such as U.S.
Food and Drug Adminis tration regulations and California
Proposition 65, affect the manufacture of materials to
be used in food and beverage containers. The Coalition
of Northeastern Governors (CONEG) model law (as enacted
by several states) governing the use or presence of
certain materials has been passed in some states and
may impact the manufacture of certain packages or
packaging components for foods and beverages. A proposed
directive similar to the CONEG legislation is under
consideration by the Commission of the European Union.

Environmental laws and regulations are important
both to the Company and to the communities where it
operates. The Company supports the use of sound
scientific research and realistic risk criteria to
analyze environmental and human health effects and to
develop effective laws and regu lations in all countries
where it operates. Alcoa recognizes that recycling and
waste reduction offer real solutions to the solid waste
problem and it continues vigorously to pursue efforts in
these areas.

Employees

During 1994 the Company employed an average of
approximately 61,700 people worldwide. Three-year
labor agreements ratified in 1993 cover the majority of
the Company's U.S. production workers.

Wages for employees in Australia are covered by
agreements which are negotiated under guidelines
established by a national industrial relations
authority.

Wages for both hourly and salaried employees in
Brazil are negotiated annually in compliance with
government guidelines. Each Aluminio location,
however, has established a separate compensation
package for its employees which includes real wage
increases and certain employee welfare plans.

Item 2. Properties.

See "Item 1 - Business." Alcoa believes that its
facilities, substantially all of which are owned, are
suitable and adequate for its operations.

Item 3. Legal Proceedings.

In the ordinary course of its business, Alcoa is
involved in a number of lawsuits and claims, both actual
and potential, including some which it has asserted
against others. While the amounts claimed may be
substantial, the ultimate liability cannot now be
determined because of the considerable uncertainties
that exist. It is possible that results of operations
or liquidity in a particular period could be materially
affected by certain contingencies. Management believes,
however, that the disposition of matters that are
pending or asserted will not have a material adverse
effect on the financial position of the Company.

Environmental Matters

Alcoa is involved in proceedings under the
Superfund or analogous state provisions regarding the
usage, disposal, storage or treatment of hazardous
substances at a number of sites in the U.S.

15

The Company has committed to participate, or is engaged in
negotiations with Federal or state authorities relative
to its alleged liability for participation, in clean-up
efforts at several such sites.

In response to a unilateral order issued under
Section 106 of CERCLA by the U.S. Environmental
Protection Agency (EPA) Region II regarding releases of
hazardous substances, including polychlorinated biphenyls
(PCBs) into the Grasse River near its Massena, New York
facility, Alcoa proposed during 1993 to EPA that it engage
in certain remedial activities in the Grasse River for the
removal and appropriate disposal of certain river sediments.
The remedial activities proposed for implementation in 1994
did not occur because of delays in securing necessary
governmental approvals for the work plan for conduct of the
work and disposal of the removed sediments. The Company
continues to pursue this action and anticipates that the
necessary approvals will occur to permit the sediment removal
activity during 1995.

Representatives of various Federal and state agencies
and a Native American tribe, acting in their capacities as
trustees for natural resources, have asserted that Alcoa
may be liable for loss or damage to such resources under
Federal and state law based on Alcoa's operations at its
Massena, New York facility. While formal proceedings have
not been instituted, the Company is actively investigating
these claims.

In March 1994 the EPA included the "Alcoa (Point
Comfort)/Lavaca Bay" site on the National Priorities
List (NPL). The site includes portions of Alcoa's Point
Comfort, Texas bauxite refining operations and portions
of Lavaca Bay, Texas, adjacent to the plant. On March 31,
1994, Alcoa and Region VI of the EPA entered into an
administrative order on consent, EPA Docket No. 6-11-94,
concerning the Alcoa (Point Comfort)/Lavaca Bay site.
The administrative order requires the Company to conduct
a remedial investiga tion and feasibility study at the
site overseen by the EPA. Work under the administrative
order is proceeding. Certain federal and state natural
resource trustees previously served Alcoa with notice of
their intent to file suit to recover damages for alleged
loss, injury or destruction of natural resources in
Lavaca Bay and to recover the costs for performing the
assessment of such alleged damages.

The Stolle Corporation (Stolle), a subsidiary, had
advised the Ohio EPA of certain hazardous waste management
practices that may not have met applicable regulatory
requirements and that Stolle had been contacted by the
Ohio Attorney General's Office concerning the matter.
In February 1995, this matter was settled and Stolle agreed
to pay a fine of $138,000 and administrative costs to the
State of Ohio. Stolle also agreed to institute a Pollution
Prevention program pursuant to Ohio EPA guidelines.

Other Matters

Alcoa was named as one of several defendants in a
number of lawsuits filed as a result of the Sioux City,
Iowa DC-10 plane crash in 1989. The plaintiffs claim
that Alcoa fabricated the titanium fan disk involved in
the alleged engine failure of the plane from a titanium
forging supplied by a third party. Twenty-two of the
117 cases are still pending; the other 95 have been
settled without participation by Alcoa. While Alcoa is
covered by the releases given by the plaintiffs in the
settled cases, Alcoa remains subject to claims for
contribution from the defendants who have actually paid
the settlements. In some of the cases, punitive damages
of $5 million are sought from each defendant.

Alcoa and a subsidiary were notified in September 1991
by the Department of Justice (DOJ) of its investigation
regarding criminal violations of antitrust laws in the
small press, hard alloy extrusion industry. On March 5,
1993, Alcoa and the subsidiary received an antitrust
grand jury investigation subpoena requiring production
of documents relating to pricing of small press, hard
alloy extrusions. Alcoa and its subsidiary have provided
the documentation requested. The investigation is
continuing.

In October 1992 Alcoa Composites, Inc. was served
with a subpoena requiring the production of certain
documentary material to the U.S. government in
connection with an investigation to determine

16

whether criminal violations of federal defense procurement
laws or regulations occurred with respect to the subsidiary's
subcontract to manufacture helicopter blades for the U.S.
Army. The government has closed the criminal investigation
in this matter but continues to evaluate possible adminis-
trative adjustment to the subcontract price.

In December 1992 Alcoa initiated a lawsuit against
nearly one hundred different insurance carriers that
provided Alcoa with insurance coverage for various
periods between the years 1956 and 1985. The suit asks
the court to declare that these insurance companies are
required, under the terms of the policies issued, to
reimburse monies spent by Alcoa in the past or future
for environmental liabilities that have arisen in recent
years.

On December 21, 1992, Alcoa was named as a defendant
in KML Leasing v. Rockwell Standard Corporation filed in
the U.S. District Court for the District of Oklahoma on
behalf of 7,317 Aero Commander, Rockwell Commander and
Gulfstream Commander aircraft owners. The complaint
alleges defects in certain wingspars manufactured by
Alcoa. Alcoa's aircraft builders products liability
insurance carrier has assumed defense of the matter. In
May 1993, Alcoa received a reservation of rights letter
from its insurance carrier which purports to reserve
its rights with respect to a majority of the types of
damages claimed. Alcoa continues to challenge the
reservation.

In December 1993 Alcoa was served with a subpoena from
the Antitrust Division of the DOJ to produce documents
to a Federal grand jury sitting in Philadelphia. The
grand jury investigated pricing practices in the used
beverage container and aluminum scrap markets. The matter
was terminated in September 1994.

Alcoa and Alcoa Specialty Chemicals, Inc., a
subsidiary, are defendants in a case filed by Aluminum
Chemicals, Inc., et al., in the District Court of Harris
County, Texas. Plaintiffs allege claims for breach of
fiduciary duty, fraud, interference with contractual
and business relations, breach of contract, conversion,
misappropriation of trade secrets, deceptive trade
practices and civil conspiracy in connection with a
former partnership, Alcoa-Coastal Chemicals. The
plaintiffs are seeking lost profits and other
compensatory damages in excess of $100 million, and
punitive damages.

As part of an ongoing investigation, Alcoa Fujikura
Ltd. (AFL), a subsidiary, received formal notice in
March 1994 that the United States Customs Service (USCS)
was contemplating issuance of a claim for monetary
penalties and marking duties against AFL for allegedly
fraudulent importations from Mexico of automotive wiring
harnesses into the United States from July 1986 through
December 1991. AFL cooperated with the USCS in an audit
of the customs duties AFL paid on automotive wiring
harness imports from Mexico in the 1986-1993 period. On
February 2, 1995, this matter was settled and the
investigation and audit were terminated.

In December 1993 the European Union Competition
Office and German Cartel Office began an investigation
of the competitive practices of Alcoa Chemie, GmbH, a
subsidiary, in the tabular alumina business in Germany.
The subsidiary cooperated with the investigation and is
awaiting response from the authorities.

In August 1994 the DOJ issued a Civil Investigative
Demand (CID) to Alcoa regarding activities undertaken by
Alcoa in response to a multinational Memorandum of Under-
standing negotiated by the U.S. government and other
sovereign nations. Alcoa complied with the request in
November 1994.

17

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of the Company's
security holders during the fourth quarter of 1994.

Item 4A. Executive Officers of the Registrant.

The names, ages, positions and areas of responsibility
of the executive officers of the Registrant as of March 1,
1995 are listed below.

Paul H. O'Neill, 59, Chairman of the Board and Chief
Executive Officer. Mr. O'Neill became a director of Alcoa
in 1986 and was elected Chairman of the Board and Chief
Executive Officer effective in June 1987. Before joining
Alcoa, Mr. O'Neill had been an officer since 1977 and
President and a director since 1985 of International Paper
Company.

Alain J. P. Belda, 51, Executive Vice President.
Mr. Belda was elected Executive Vice President in
March 1994. He was President of Alcoa Aluminio S.A. in
Brazil from 1979 to March 1994. Mr. Belda was elected
Vice President of Alcoa in 1982 and, in 1989, was
given responsibility for all of Alcoa's interests in
Latin America (other than Suriname). In August 1991
he was named President - Latin America for the
Company. In his current assignment Mr. Belda works
with 10 Alcoa business unit presidents.

George E. Bergeron, 53, Vice President and
President Rigid Packaging Division. Mr. Bergeron was
named President - Alcoa Closure Systems International
in 1982 and was elected Vice President and General
Manager - Rigid Packaging Division in July 1990. He
assumed his current responsibilities in 1991.

Peter R. Bridenbaugh, 54, Executive Vice President
and Chief Technical Officer. Dr. Bridenbaugh became
Director, Alcoa Laboratories in 1983. He was elected
Vice President Research and Development in 1984. He
assumed his current responsibilities in 1991.

John L. Diederich, 58, Executive Vice President
Chairman's Counsel. Mr. Diederich was elected
Managing Director of Alcoa of Australia Limited and
Vice President of Alcoa in 1982. He was named Vice
President - Metals and Chemicals in July 1986 and
was elected a Group Vice President in October 1986.
He assumed his current responsibilities in 1991.

Richard L. Fischer, 58, Executive Vice President
Chairman's Counsel. Mr. Fischer was elected Vice
President and General Counsel in 1983 and became a
Senior Vice President in 1984. From 1985 through
1989 he also had responsibility for Government and
Public Affairs. He was given additional responsibilities
in 1986 for Corporate Development and in 1989 for the
Company's expansion activities in Europe and Asia. He
assumed his current responsibilities in 1991.

Ronald R. Hoffman, 60, Executive Vice President -
Human Resources, Quality, and Communications. Mr. Hoffman,
an officer since 1975, was named Vice President Flat Rolled
Products in 1979. He was elected a Group Vice President in
1984 and was given responsibility for the Company's
Packaging Systems group in 1986. He assumed his current
responsibilities in 1991.

Jan H. M. Hommen, 51, Executive Vice President and
Chief Financial Officer. Mr. Hommen was Financial
Director of Alcoa Nederland until 1979 when he was
elected Assistant Treasurer - Corporate Finance of
Alcoa. He was elected Treasurer in August 1986 and
Vice President and Treasurer in December 1986. He was
elected to his current position in 1991.

Frank P. Jones, Jr., 65, Vice President - Government
Affairs. Mr. Jones was named Manager - Government
Affairs in 1967 and General Manager in 1970. He was
elected to his current position in 1971.

18

Richard B. Kelson, 48, Executive Vice President
Environment, Health and Safety, and General Counsel.
Mr. Kelson was appointed Assistant Secretary and
Managing General Attorney in 1984 and Assistant General
Counsel in 1989. He was elected Senior Vice
President Environment, Health and Safety in 1991 and
Executive Vice President and General Counsel in May
1994.

L. Richard Milner, 48, Vice President - Corporate
Development. Mr. Milner was named General Manager
Castings Division in 1984 and General Manager -
Primary Products, Marketing in 1986. In 1987 he
assumed responsibility as Director - Corporate
Development. He was elected to his current position
in 1991.

Robert F. Slagle, 54, Vice President and Managing
Director - Alcoa of Australia Limited. Mr. Slagle was
elected Treasurer in 1982 and Vice President in 1984.
In 1986, he was named Vice President Industrial
Chemicals and, in 1987, was named Vice President
Industrial Chemicals and U.S. Alumina Operations.
Mr. Slagle was named Vice President - Raw Materials,
Alumina and Industrial Chemicals in 1989 and Managing
Director - Alcoa of Australia Limited in 1991.

G. Keith Turnbull, 59, Executive Vice President
Strategic Analysis/Planning and Information. Dr. Turnbull
was appointed Assistant Director of Alcoa Laboratories in
1980. He was named Director Technology Planning in 1982
and Vice President Technology Planning in 1986. In 1991
he was elected to his current position.

PART II

Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.

Dividend per share data, high and low prices per
share and the principal exchanges on which the Company's
common stock is traded are set forth on pages 46 through
47 of the 1994 Annual Report to Shareholders (the Annual
Report) and are incorporated herein by reference.

At March 7, 1995 (the record date for the Company's
1995 annual shareholders meeting) there were approximately
55,200 Alcoa shareholders, including both record holders
and an estimate of the number of individual participants
in security position listings.

Item 6. Selected Financial Data.

The comparative columnar table showing selected finan-
cial data for the Company is set forth on page 18 of the
Annual Report and is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.

Management's review and comments on the consolidated
financial statements are set forth on pages 18 through 24
of the Annual Report and are incorporated herein by
reference.

19

Item 8. Financial Statements and Supplementary Data.

The Company's consolidated financial statements, the
notes thereto and the report of the independent public
accountants are set forth on pages 25 through 37 of
the Annual Report and are incorporated herein by
reference.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of the
Registrant.

The information regarding Directors is contained under
the caption "Board of Directors" on pages 4 through 8
of the Registrant's definitive Proxy Statement dated
March 14, 1995 (the Proxy Statement) and is
incorporated herein by reference.

The information regarding executive officers is set
forth in Part I, Item 4A under "Executive Officers of
the Registrant."

Item 11. Executive Compensation.

This information is contained under the caption
"Compensation of executive officers" on pages 9
through 14 of the Proxy Statement. The performance graph and
Compensation Committee Report shall not be deemed to
be "filed."

Item 12. Security Ownership of Certain Beneficial Owners and
Management.

This information is contained under the caption
"Security ownership" on page 9 of the Proxy Statement
and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

This information is contained under the caption
"Certain relationships and related transactions" on page 8 of
the Proxy Statement and is incorporated herein by reference.

PART IV

Item 14. Exhibits, Financial Statement Schedule and Reports
on Form 8K.

(a) The Company's consolidated financial statements,
the notes thereto and the report of the independent public
accountants are set forth on pages 25 through 37 of the
Annual Report and are incorporated herein by reference.

With the exception of the aforementioned information
and the information incorporated by reference in Part II
hereof, the Annual Report is not to be deemed filed as part
of this report.

20

The following report and additional financial data
should be read in conjunction with the Company's consoli-
dated financial statements in the Annual Report:

Independent Accountant's Report of Coopers &
Lybrand dated January 11, 1995 on the
Company's consolidated financial statement
schedule filed as a part hereof for the fiscal
years ended December 31, 1994, 1993 and 1992
and related consent dated March 14, 1995.

Schedule II - Valuation and Qualifying Accounts for
the fiscal years ended December 31, 1994, 1993 and 1992.

(b) Reports filed on Form 8-K. The Company filed a
Report on Form 8-K, dated November 11, 1994, with the
Securities and Exchange Commission consisting of a
press release concerning a two-for-one split of the
Company's common stock, increase in common stock dividend
and resumption of common stock repurchase program.

(c) Exhibits.

Exhibit
Number Description*
- ------ -----------

3(a). Articles of the Registrant as amended,
incorporated by reference to exhibit 3(a) to the
Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993.

3(b). By-Laws of the Registrant, incorporated by
reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30,
1991.

10(a). Long Term Stock Incentive Plan, effective
January 1, 1992, incorporated by reference
to exhibit 10(a) to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1991.

10(a)(1). Amendments to Long Term Stock Incentive
Plan, effective January 1, 1995 (subject to
shareholder approval) (filed herewith).

10(b). Employees' Excess Benefit Plan, Plan A,
incorporated by reference to exhibit 10(b) to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1980.

10(c). Incentive Compensation Plan, as amended
effective January 1, 1993, incorporated by
reference to exhibit 10(c) to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1992.

10(d). Employees' Excess Benefit Plan, Plan C, as
amended and restated in 1994, effective
January 1, 1989 (filed herewith).

10(e). Employees' Excess Benefit Plan, Plan D, as
amended effective October 30, 1992,
incorporated by reference to exhibit 10(e)
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.

10(e)(1). Amendment to Employees' Excess Benefit
Plan, Plan D, effective October 30, 1992
(filed herewith).

10(f). Employment Agreement of Paul H. O'Neill,
as amended through February 25, 1993,
incorporated by reference to exhibit 10(h)
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1987,
exhibit 10(g) to the Company's Annual Report
on Form 10-K for the year ended December 31,
1990, and exhibit 10(f)(2) to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1992.

21

10(g). Deferred Fee Plan for Directors, as amended
effective November 1, 1992, incorporated
by reference to exhibit 10(h) to the
Company's Annual Report on Form 10-K for
the year ended December 31, 1992.

10(h). Restricted Stock Plan for Non-Employee
Directors, as amended effective March 10,
1995 (filed herewith).

10(i). Fee Continuation Plan for Non-Employee
Directors, incorporated by reference to
exhibit 10(k) to the Company's Annual Report
on Form 10-K for the year ended December 31,
1989.

10(j). Deferred Compensation Plan, as amended
effective October 30, 1992, incorporated
by reference to exhibit 10(k) to the
Company's Annual Report on Form 10-K for
the year ended December 31, 1992.

10(j)(1). Amendments to Deferred Compensation Plan,
effective January 1, 1993, February 1,
1994 and January 1, 1995 (filed herewith).

10(k). Summary of the Executive Split Dollar
Life Insurance Plan, dated November 1990,
incorporated by reference to exhibit
10(m) to the Company's Annual Report on
Form 10-K for the year ended December 31,
1990.

10(l). Form of Indemnity Agreement between the
Company and individual directors or officers,
incorporated by reference to exhibit 10(j)
to the Company's Annual Report on Form 10-K
for the year ended December 31, 1987.

11. Computation of Earnings per Common Share.

12. Computation of Ratio of Earnings to Fixed
Charges.

13. Portions of Alcoa's 1994 Annual Report to
Shareholders.

18. Letter regarding changes in accounting
principles.

21. Subsidiaries and Equity Entities of the
Registrant.

23. Consent of Independent Certified Public
Accountants.

24. Power of Attorney for certain directors.

27. Financial data schedule.

* Exhibit Nos. 10(a) through 10(k) are management
contracts or compensatory plans required to be filed
as Exhibits to this Form 10-K.

Amendments and modifications to other Exhibits
previously filed have been omitted when in the opinion
of the Registrant such Exhibits as amended or modified
are no longer material or, in certain instances, are no
longer required to be filed as Exhibits.

No other instruments defining the rights of holders
of long-term debt of the Registrant or its subsidiaries
have been filed as exhibits because no such instruments
met the threshold materiality requirements under
Regulation S-K. The Registrant agrees, however, to
furnish a copy of any such instruments to the Commission
upon request.

(d) Financial Statement Schedule.

22

To the Shareholders and Board of Directors
Aluminum Company of America

Our report on the consolidated financial statements
of Aluminum Company of America has been incorporated by
reference in this Form 10-K from page 25 of the 1994
Annual Report to Shareholders of Aluminum Company of America.
In connection with our audits of such financial statements,
we have also audited the related financial statement schedule
listed under Item 14 of this Form 10K.

In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in
all material respects, the information required to be
included therein.

/S/COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.

600 Grant Street
Pittsburgh, Pennsylvania
January 11, 1995

23

SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS FOR THE YEARS ENDED DECEMBER 31
(in millions)

Col. A Col. B Col. C Col. D Col. E
- ------ ------ ------ ------ ------
Additions
--------------------------
Balance at Charged to Charged to
beginning costs and other Balance at
Description of period expenses accounts (A) Deductions (B) end of period
- ----------- --------- -------- ------------ -------------- -------------

Allowance for doubtful accounts:

1994 $ 33.2 $13.4 $(2.0)(A) $ 7.2(B) $ 37.4

1993 17.7 $19.2 $(0.2)(A) $ 3.5(B) $ 33.2

1992 $ 17.3 $ 6.8 $(3.1)(A) $ 3.3(B) $ 17.7

Income tax valuation allowance:

1994 $171.4 $19.9 - $21.3(D) $170.0

1993 $157.3 $52.7 - $38.6(D) $171.4

1992 $156.1(C) $ 1.2 - - $157.3

Notes: (A) Collections on accounts previously written off, acquisition of subsidiaries and
foreign currency translation adjustments.
(B) Uncollectible accounts written off.
(C) Represents the implementation of SFAS 109 effective January 1, 1992.
(D) Related primarily to utilization of tax loss carryforwards.

25

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the under-
signed, thereunto duly authorized.

ALUMINUM COMPANY OF AMERICA

March 22, 1995 By /s/ Earnest J. Edwards
Earnest J. Edwards
Vice President and Controller
(Also signing as Principal
Accounting Officer)

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

Signature Title Date

/s/ Paul H. O'Neill Chairman of the Board March 22, 1995
Paul H. O'Neill and Chief Executive
Officer (Principal
Executive Officer and
Director)

/s/ Jan H. M. Hommen Executive Vice President March 22, 1995
Jan H. M. Hommen and Chief Financial
Officer (Principal
Financial Officer)

Kenneth W. Dam, John P. Diesel, Joseph T. Gorman, Judith
M. Gueron, Sir Ronald C. Hampel, John P. Mulroney, Sir
Arvi Parbo, Henry B. Schacht, Forrest N. Shumway,
Franklin A. Thomas and Marina v.N. Whitman, each as a
Director, on March 22, 1995, by Barbara S. Jeremiah, their
Attorney-in-Fact.*

*By /s/ Barbara S. Jeremiah
Barbara S. Jeremiah Attorney-in-Fact

26

EXHIBIT INDEX

Exhibit
Number Description
- ------ -----------

3(a). Articles of the Registrant as amended,
incorporated by reference to exhibit 3(a)
to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993.

3(b). By-Laws of the Registrant, incorporated by
reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30,
1991.

10(a). Long Term Stock Incentive Plan, effective
January 1, 1992, incorporated by reference to
exhibit 10(a) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991.

10(a)(1). Amendments to Long Term Stock Incentive Plan,
effective January 1, 1995 (subject to shareholder
approval) (filed herewith).

10(b). Employees' Excess Benefit Plan, Plan A, incorpo-
rated by reference to exhibit 10(b) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1980.

10(c). Incentive Compensation Plan, as amended effective
January 1, 1993, incorporated by reference to
exhibit 10(c) to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.

10(d). Employees' Excess Benefit Plan, Plan C, as
amended and restated in 1994, effective
January 1, 1989 (filed herewith).

10(e). Employees' Excess Benefit Plan, Plan D, as
amended effective October 30, 1992, incorporated
by reference to exhibit 10(e) to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1992.

10(e)(1). Amendment to Employees' Excess Benefit Plan,
Plan D, effective October 30, 1992 (filed
herewith).

10(f). Employment Agreement of Paul H. O'Neill,
as amended through February 25, 1993,
incorporated by reference to exhibit 10(h) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1987, exhibit 10(g) to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1990, and
exhibit 10(f)(2) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992.

10(g). Deferred Fee Plan for Directors, as amended
effective November 1, 1992, incorporated by reference
to exhibit 10(h) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992.

10(h). Restricted Stock Plan for Non-Employee Directors,
as amended effective March 10, 1995 (filed herewith).

10(i). Fee Continuation Plan for Non-Employee Directors,
incorporated by reference to exhibit 10(k) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1989.

10(j). Deferred Compensation Plan, as amended effective
October 30, 1992, incorporated by reference to
exhibit 10(k) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992.

10(j)(1). Amendments to Deferred Compensation Plan, effec-
tive January 1, 1993, February 1, 1994 and
January 1, 1995 (filed herewith).

10(k). Summary of the Executive Split Dollar Life
Insurance Plan, dated November 1990, incorporated
by reference to exhibit 10(m) to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1990.

10(l). Form of Indemnity Agreement between the Company
and individual directors or officers, incorporated
by reference to exhibit 10(j) to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1987.

11. Computation of Earnings per Common Share.

12. Computation of Ratio of Earnings to Fixed
Charges.

13. Portions of Alcoa's 1994 Annual Report to
Shareholders.

18. Letter regarding changes in accounting principles.

21. Subsidiaries and Equity Entities of the
Registrant.

23. Consent of Independent Certified Public
Accountants.

24. Power of Attorney for certain directors.

27. Financial data schedule.