The auto industry has seen its share of battles over the years. From the simple domestic rivalry between Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM), to the industry’s epic battle for survival during the credit crisis. Today, a new battle is brewing in the industry in light of our nation’s drive to become more fuel efficient. This new battle pits aluminum against lighter weight steel.
Could the next Ford F-150 have an aluminum body? Photo Credit: Ford
There are rumors the next Ford Motor Company (NYSE:F) F-150 will have an aluminum body, which would shave off about 700 pounds, or about 15% of its total body weight. The weight loss would be critical for the truck, as well as the Ford Motor Company (NYSE:F) brand, to meet the new fuel-efficiency standards. The move is really an effort by Ford Motor Company (NYSE:F) to get ahead of the curve as the move would equate to a 25% increase in fuel economy.
Both aluminum and steel desperately need the automotive sector’s business. Steel has been a longtime supplier to the industry but has given way to aluminum recently due to manufacturers’ focus on weight reduction as MPG efficiency standards have increased. While aluminum makes up a small portion of a car’s total weight when compared to steel, the figure has grown from nearly nothing in only a few short years.
Steel will always have a place because it’s critical for truck frames due to the heavy payloads they support. While Ford Motor Company (NYSE:F) did look into an aluminum frame, it decided against the idea because so much more aluminum would be needed that it was cost prohibitive and didn’t provide much weight reduction. That’s one reason why United States Steel Corporation (NYSE:X) believes it will be a big winner due to its cost structure and ability to produce lighter, stronger steel products. The company is continuously researching and developing new grades and processes to better align with its customers’ needs. That’s why it believes it can fend off aluminum’s assault.
In fact, Ford’s chief domestic rival, General Motors Company (NYSE:GM), is taking a much different approach in it has decided to stick with steel for the body of its trucks. Instead, General Motors Company (NYSE:GM) is focusing on improving engines and transmissions to reduce fuel consumption. It’s also producing two different trucks, one focused on power and towing performance and a second smaller truck which will offer about 20% better gas mileage. While both versions will use aluminum, neither will do so to the extent of Ford Motor Company (NYSE:F).
The choice between aluminum and steel could make or break these two sets of rivals. Ford Motor Company (NYSE:F)’s decision to cover its next-generation F-150 with aluminum is a big risk, though that does mean its rewards are substantial as well. That could mean big things for investors in Ford’s stock.
The article Is Ford Taking a Huge Risk in This Battle for the Automotive Industry? originally appeared on Fool.com and is written by Matt DiLallo.
Matt DiLallo has the following options: Long Jan 2014 $10 Calls on Ford and Short Jan 2014 $10 Puts on Ford. The Motley Fool recommends Ford and General Motors (NYSE:GM). The Motley Fool owns shares of Ford.
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