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.
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.
Fuel efficiency in the U.S. must reach 54.5 MPG by 2025. To reach this level, weight reduction will be critical, which is where aluminum could come into play. In fact, a recent study emerged that bodes well for aluminum producers like Alcoa Inc (NYSE:AA), as it concluded that an all-aluminum body could reduce weight in some vehicles by 40%, which would enable MPG efficiency to increase by 14%. This type of initiative could see aluminum usage in autos double from 2008 to 2025. Alcoa Inc (NYSE:AA) sees big potential for its business as the company forecasts 10 times more North American Aluminum Body Sheet content per vehicle (in pounds) by 2025 from 2012 levels (from 14 to 136 pounds).
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.