Slide 1: New Leadership Is Needed At Arconic
New Leadership Is Needed At Arconic January 31st, 2017 www.NewArconic.com
Slide 2: Disclaimer
Disclaimer THIS PRESENTATION IS FOR DISCUSSION AND GENERAL INFORMATIONAL PURPOSES ONLY. IT DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION, SUITABILITY, OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS PRESENTATION, AND SHOULD NOT BE TAKEN AS ADVICE O
Slide 3: Why Are We Here?
Why Are We Here? Prolonged disappointing financial results combined with the irreparably damaged credibility of Arconic’s current management have created a circumstance whereby Arconic will never approach its potential under the current CEO For more than a year, Elliott has engaged in private disc
Slide 4: Our Goals at Arconic
Our Goals at Arconic Elliott is Arconic’s largest shareholder, owning approximately 10.5% of shares outstanding. We are seeking sustained improvements at Arconic to benefit all long-term stakeholders Please note that Elliott holds economic interest of over 12.1% of Arconic Change the Culture Improve
Slide 5: Change the Culture: Remove Dr. Klaus Kleinfeld from Arconic
Change the Culture: Remove Dr. Klaus Kleinfeld from Arconic Despite years of poor performance, a culture of grandiose rhetoric devoid of any real substance or follow-through has been tolerated Arconic points to this performance metric to assert that Dr. Kleinfeld “saved the Company.” 1-Year 2-Year 3
Slide 6: Change the Culture: Consider Larry Lawson for CEO
Change the Culture: Consider Larry Lawson for CEO Elliott has engaged Mr. Lawson as a consultant on its investment in Arconic and believes that Mr. Lawson should be a leading candidate to become the Company’s CEO, as he has the ideal set of skills needed to turn around Arconic’s woefully and continu
Slide 7: Drive Sustainable Shareholder Value Through Operational Improvement
Drive Sustainable Shareholder Value Through Operational Improvement 1 Close the Margin Gap with Precision Castparts (“PCC”) EPS margins have been an average of 700 basis points below PCC despite the fact that there are few (if any) structural reasons for this gap Each 100 bps improvement in marg
Slide 8: Even Modest Improvement Produces Dramatic Returns
Even Modest Improvement Produces Dramatic Returns Elliott’s targets are based on the mid-point of Arconic’s 2017 revenue target Unlike management, Elliott believes that Arconic margins can be improved even absent additional scale — In short, even without growth, Arconic could be worth at least $
Slide 9: Shareholder Nominees
Shareholder Nominees Ideal mix of skills and experience to deliver meaningful change at Arconic Please note that if the Company renominates Ulrich Schmidt at the 2017 annual Christopher Ayers meeting, Elliott does not intend to seek his replacement. Former Chief Executive Officer of WireCo WorldGr
Slide 10: Kleinfeld quote, 1/10/2011
“On a short, meaning next year or this year, and midterm, three- to five-year timeframe, we will continue to produce outstanding shareholder value across all businesses, and take my word, that's our promise.” Dr. Klaus Kleinfeld, 1/10/2011
Slide 11: TSR Under Dr. Klaus Kleinfeld
TSR Under Dr. Klaus Kleinfeld Since becoming CEO, Dr. Klaus Kleinfeld has underperformed the Company’s proxy peer median by 156% and the S&P 500 by 151% Alcoa Cumulative TSR Relative to Peer Median and S&P 500 Under Dr. Klaus Kleinfeld 87 82 Relative TSR vs. Proxy Peers since Alcoa’s low: -293% (69)
Slide 12: TSR Under Dr. Klaus Kleinfeld vs. Company Selected Peers
TSR Under Dr. Klaus Kleinfeld vs. Company Selected Peers Under Dr. Kleinfeld, the Company massively underperformed virtually all peer groups over virtually all periods Alcoa Cumulative TSR Relative to Each Peer Median and S&P 500 Under Dr. Klaus Kleinfeld vs Proxy Peers vs. Industrials Proxy Peers v
Slide 13: Alcoa vs. S&P 500 During CEO Tenure
Alcoa vs. S&P 500 During CEO Tenure 465 of the current S&P 500 companies have been in the index since May 1, 2008. Out of those 465 companies, Alcoa ranks 456th. All of the companies to the left of Alcoa have changed CEOs during this period “But we are also very focused on ensuring that each and eve
Slide 14: Arconic's "Dr. Klaus" Discount – 2017 Numbers
Arconic’s “Dr. Klaus” Discount – 2017 Numbers Arconic’s discount, we believe, can principally be attributed to current management’s lack of credibility EV/EBITDA vs. Peers Adj. EV/EBITDAP vs. Peers 11x 10.5x 11x 10.4x 10.0x 10x 9.8x 10x 9x 8.7x 8.7x 9x 8x 8x 7x 7x 6x 6x 5x 5x Arconic Mean Median Arc
Slide 15: Arconic's "Dr. Klaus" Discount – 2018 Numbers
Arconic’s “Dr. Klaus” Discount – 2018 Numbers Larger discount on 2018 estimates suggests lack of confidence in management’s ability to hit targets EV/EBITDA vs. Peers Adj. EV/EBITDAP vs. Peers 10x 9.5x 10x 9.5x 9.3x 9.2x 9x 9x 8x 7.5x 8x 7.6x 7x 7x 6x 6x 5x 5x Arconic Median Mean Arconic Median Mean
Slide 16: Kleinfeld quote on disciplined execution, 11/7/13
“Now, I mean, talking to managers, you'd say disciplined execution? Really? I mean, is that a strategic priority? Isn't that what business is about? I mean, it's not just warm words and nice plans, you've got to execute, right? But we actually have put I think more of a discipline around it than wha
Slide 17: "New" 2019 Guidance Resembles Original 2016 Guidance
“New” 2019 Guidance Resembles Original 2016 Guidance After a series of massive guidance misses, the Company released three year targets which are nearly identical to the Company’s original 2016 guidance , which pertained until as recently as April 2016 2016 and 2019 Revenue Guidance 2016 and 2019 EB
Slide 18: Returns Lower Than Cost of Capital
Returns Lower Than Cost of Capital During Dr. Klaus Kleinfeld’s tenure, returns on invested capital have remained consistently below the Company’s weighted average cost of capital “We look at IRRs versus cost of capital, right. So we're breaking in part of the synergies, we look at the returns versu
Slide 19: "You can only win the 'war' with ideas, not with spending cuts"
“You can only win the 'war' with ideas, not with spending cuts” 19 ELLIOTT ® Dr. Klaus Kleinfeld
Slide 20: Arconic EPS: Unable to Close the PCC Margin Gap
Arconic EPS: Unable to Close the PCC Margin Gap Elliott worked with a number of experts including: former employees and customers of both Arconic EPS and Precision Castparts, external consulting firms, and an investment bank. The conclusion is unambiguous. EPS and PCC are substantially similar busin
Slide 21: GRP: Massive Room to Improve
GRP: Massive Room to Improve Going bottoms-up, we analyzed GRP’s mix and cost position relative to peers. The opportunity for improvement is enormous CAN BODY AUTO STOCK PLATE BRAZING SHEET AUTO BODY HEAT TREATED STRUCTURAL OTHER TOTAL Industry Avg. Opportunity size $70M $32M $1M $20M $2M $1M $21M ~
Slide 22: "We're in this together."
“We’re in this together.” Dr. Klaus Kleinfeld, 11/4/2015
Slide 23: Poor Corporate Governance Practices
Poor Corporate Governance Practices “[O]ne of the things about Alcoa Corp. that is fundamentally different than Alcoa Inc. is that we were given the opportunity to come out with a much better governance structure. So as a new company, we separated the Chairman and the CEO role. I personally believe
Slide 24: Generous Compensation Despite Continually Poor Performance
Generous Compensation Despite Continually Poor Performance Dr. Klaus Kleinfeld has been paid more than $111M during his tenure despite generating massively negative returns. He has also sold more shares than he owns, including $46M of stock since 2014 Cumulative TSR vs. Cumulative CEO Compensation $
Slide 25: Culture of High C-Suite Turnover
Culture of High C-Suite Turnover Dr. Klaus Kleinfeld has been the only constant among Company leadership. Notably there have been 7 heads of investor relations Despite the Company’s penchant for repeatedly ‘shooting the messenger,’ the problems at Arconic run much deeper than poor investor communica
Slide 26: Contact Information
Contact Information Arconic Shareholders 1212 Avenue of the Americas, 24th Floor New York, NY 10036 Tel: +1.212.297.0720 Toll Free: +1.877.796.5274 Fax: +1.212.297.1710 Email: info@okapipartners.com Media Inquiries Stephen Spruiell 212-478-2017 sspruiell@elliottmgmt.com 26 ELLIOTT ®