Ford's Switch to Aluminum F-150 Increases Costs $500 a Truck


For some time, the story on the new 2015 Ford F-150 has been how much more expensive aluminum is to use instead of steel. Its usage has been labeled a dangerous gamble that could bankrupt the truckmaker. However, Forbes magazine reports that the cost difference between the two may be as little as an additional $500 per pickup truck.

Forbes reporter Joann Muller looked at the costs involved in the new F-150's production, speaking with Ford insiders, suppliers and "multiple metal and automotive experts." She learned that Ford did a lot of research when calculating overall costs to make the materials switch.

Ford uses a thicker sheet of aluminum – roughly 1.7 times thicker — to keep the truck as strong or stronger then when it had steel body panels. Materials are priced by the pound, so Ford's costs per truck are likely to be a bit higher than those of a luxury sports car such as a Jaguar.

A 2015 F-150 uses 855 pounds of aluminum sheeting for each truck versus 1,455 pounds of steel, according to Forbes. Looking at current market pricing conditions, the aluminum's total cost is $2.19 per pound. In comparison, steel costs about 55 cents per pound.

Although this seems like a big difference, when you figure out the net savings on a per truck basis, the weight being saved by using aluminum is about 400 pounds or just $725 per truck. For Ford to hit the 700-pound weight-savings mark, the additional weight savings comes from smaller, lighter parts in the frame and powertrain. But how do we get down to the added cost per truck of just $500?

Whenever vehicle body panels are stamped about a third of the material becomes scrap. When Ford had looked at using aluminum in its Jaguar/Land Rover ownership, this was an obstacle because it was a substantial amount of money to throw away. It works financially to have that much waste on a low-production vehicle where a premium price is charged, but with a mass-production vehicle where pricing in a competitive segment is critical to survival, the business case never worked out.

Then along came Alan Mulally from Boeing. He pointed out that Ford could collect the scrap, sell it back to the suppliers, recycle it and then use it again. This strategy allowed Ford to move forward on aluminum. Back to the math.

When selling aluminum scrap back to the suppliers, Ford nets around $1 per pound. This adds up to a savings of $280 per truck. Subtracting the savings from the cost per truck, the result is less than $500.

Now, when you sell as many trucks as Ford does, $500 per truck seems like it would add up quickly. However, that isn't really the case, and Ford hedged its aluminum bet in two other ways.

First, pricing on the some new F-150s start around $400 more than the model they replace, with other year-over-year pricing much higher than that due to new content and more advanced technologies. Ford has said this $400 price increase on select models covers the new equipment only and not the added cost of the aluminum. However, with the new equipment comes more profit, which offsets the aluminum upcharge.

Second, the average transaction price of a truck nowadays is north of $40,000, but a good number of these trucks typically come with new equipment and configured with the premium trim packages. By upselling these more profitable packages and features on essentially the same truck body; Ford is potentially able to offset the $500 of added cost with even more profit.

Additionally, if current transaction price trends continue, the $500 increase per truck in material costs is likely to be further minimized. Maybe more problematic, however (at least in the short term), is the eight to 10 weeks Ford had to shut down its two F-150 assembly plants in Dearborn, Mich., and Kansas City, Mo., to make the switch to aluminum. This will likely create a 90,000 unit shortfall at the end a full year of production. That many F-150s is not a minor problem, but in year two, three, four or beyond, when the factories are running at full production (and quite possibly with three shifts), this single-year loss is likely to be a distant logistical and financial memory. photos by Mark Williams



Ford manufacturing video below with some good production line footage: 



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