Boston, MA 04/07/2014 (wallstreetpr) – Ford Motor Company (NYSE:F)’s new F-150 pickup, is probably the first high-volume pickup truck which is scheduled to get an all-aluminum makeover. This could be the best news in a long time for aluminum companies with the closest parallel being beer cans moving from steel to aluminum in the 1970s.
Alcoa Inc (NYSE:AA) and Novelis, who are the top most U.S. aluminum sheet producers have invested close to USD 1 billion last year in preparation for this demand.
Novelis, a unit of India’s Hindalco Industries Ltd., an Aditya Birla Group enterprise is expected to spend USD 550 million to upgrade its plants in Germany and China, along with its plant at Oswego, to produce automobile grade aluminum for cars. Alcoa has done a similar thing with its plants in Iowa and Tennessee, by spending close to USD 575 million. Both the metal heavyweights are reporting hat other carmakers are going the ford way too, thus leading to a possible enhancement in raw aluminum prices, which have fallen by over 33 percent since 2011 high.
It’s a gamble
Aluminum may be lighter than steel but it is also considerably expensive. Thus creating entire cars out of aluminum requires significant investments in new machines which are involved in stamping car parts and in assembly lines.
The car companies like Ford Motor Company (NYSE:F) regularly send engineers to aluminum companies for troubleshooting any problems.
So far, the only luxury vehicles like Audi and Jaguars were made of aluminum. However the concern over fuel economy and environment is making more and more companies opt for entire cars being made out of aluminum. In general a thumb rule that works in the Auto industry is that a 10% reduction in a vehicle’s weight to 7% improvement in fuel economy.
Alcoa Chief Executive Klaus Kleinfeld was reported in October to have stated that transition of use of aluminum from the luxury end of automobile to the lower end is expected to generate considerable opportunities for the company.
