Alcoa is America’s largest aluminum manufacturer, and the third largest producer in the world. Just last year, it saw its bond rating cut to “Junk” by Moody’s, and it was removed from the Dow Jones Industrial Average where it had been for the last 44 years. Then something remarkable happened: Ford came calling.
In a story published by Bloomberg, Lloyd O’Carroll — an analyst at Northcoast Research Holdings LLC — noted that Alcoa Chairman and Chief Executive Officer Klaus Kleinfeld has increased the company’s focus on higher-margin aluminum products and rationalized the business of smelting.
“Auto body sheet has a much higher margin than anything except aircraft,” O’Carroll said. “I think 2015 is going to get a pretty big lift of usage on the F-150 and of course all of the margin benefit of that.”
The aircraft business is, of course, vital to the aluminum industry, and increased jet orders have certainly helped Alcoa over the last 11 months. But no American auto manufacturer has ever wagered so much on aluminum as Ford is doing with the F-150. The Wall Street Journal called it ” the best news for a troubled metals industry since beer cans were converted from steel in the 1970s.”
Small production aluminum cars like the Audi A8 and the Jaguar XK8 have been produced before, but the volume of the F-150 is unprecedented in the automotive world. The F-150 alone accounts for around 350,000 sales every year, about half of all the F-Series trucks built. Ford executives have already confirmed that the next generation Super Duty trucks will follow the F-150’s lead, meaning that somewhere near 750,000 Ford trucks will be constructed of aluminum.
If Sergio Marchionne’s comments at the Paris Auto Show are any indication, Chrysler is also looking toward aluminum, possibly for the Jeep Wrangler, and maybe even for the Ram pickups. He noted that the debates raging inside Ford over the decision to switch the F-150 from steel to aluminum “are going on inside our house now.”
Automotive News reported, “Although Marchionne said the Wrangler changes are under consideration, a company source with direct knowledge said the decision to build an aluminum-body Wrangler already has been made.”
For Alcoa, it means that it’s experiencing its highest earnings in three years, with a rosy future ahead as long as fuel prices remain stable, and the auto industry rushes to shave every pound from its cars before the 54.5 mile per gallon mandate hits in 2025.