--Issuer Default Rating (IDR) to 'BBB-' from 'BBB';

--Senior unsecured debt to 'BBB-' from 'BBB';

--$3.25 billion revolving credit facility to 'BBB-' from 'BBB';

--Preferred stock to 'BB+' from 'BBB-'.

--Short-term IDR to 'F3' from 'F2'; and

--Commercial paper to 'F3' from 'F2'.

The Rating Outlook is Negative.

The ratings have been downgraded as a result of lower earnings coupled with higher than expected debt levels resulting in higher financial leverage. The severe economic down turn has sharply reduced demand for aluminum resulting in high inventories, production curtailments, lower shipments and lower prices. Fitch expects weak trading conditions to persist over the next 12-18 months.

Cash balances, while large relative to historic levels, have declined to $762 million at Dec. 31, 2008 from $831 million at Sept. 30, 2008 while debt was up to $449 million in the quarter from $10.6 billion. Fitch expects negative free cash flows to persist while Alcoa completes current capital projects. Liquidity will be buoyed by the $1.021 billion expected to be received over the next six months in connection with Alcoa's exit from the Shining Prospect special purpose vehicle formed together with Aluminum Corporation of China (Chinalco) to purchase shares in Rio Tinto plc.

Total debt/operating EBITDA based on preliminary 2008 results was 3.2 times (x) at Dec. 31, 2008 and Fitch expects this figure to be between 4.5x and 5.5x in 2009. Liquidity should be adequate with less than $2 billion issued as commercial paper or borrowed under the revolver. Should Alcoa reduce borrowings significantly and in a sustainable manner whether through internally generated cash flows or equity issuance, Fitch would review the ratings with positive implications.

Alcoa ratings reflect the company's leading position in the industry, its strength in low-cost alumina production, and the operating flexibility afforded by the scope of its operations. Aluminum and alumina account for more than three-quarters of revenues.

Alcoa is the world's third largest producer of primary aluminum with an annual capacity of 4.6 million metric tons per year (mtpy). The company manages and markets the world's second largest alumina business at 15.9 million mtpy. The company's rolling mills produce about 2.3 million mtpy to supply the beverage can, automotive, aerospace and industrial goods markets. Alcoa also extrudes and casts aluminum for the automotive, aerospace and construction markets.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure.

A service of YellowBrix, Inc.