Wednesday, August 6, 2014

The Big F-150 Gamble on Aluminum

Fortune has an interesting piece on the big F-150 changeover to aluminum:

While a lot of attention has focused on outgoing CEO Alan Mulally’s One Ford plan to unify the global manufacturer, the automaker’s profits largely depend on a beefy truck that is sold only in North America and will never find a market in Asia or Europe. Not that it needs to. The F-series has outsold every other car and truck in the U.S. for more than three decades, a record of longevity that ranks in the hierarchy of superbrands like Coke and Marlboro. Some 33 million have been sold since the F-150 was introduced in 1950, twice as many as the Model T. If the revenue from the nearly 765,000 F-series Fords sold in 2013—$31.1 billion—were that of a standalone business, it would rank around 100 on this year’s Fortune 500 list. Ranked by profits, such an F-series business would place even higher.
The F-series has been the biggest beneficiary of the revolution in the pickup business. The increasing popularity of personal-use trucks has pushed average transaction prices to $40,000, and some high-end models—with luxury touches like stitched leather, heated and cooled seats, and LED interior lights—sell for more than $50,000. Vehicles that are mechanically simple, rarely reengineered, and sold in huge volumes, such as pickups, are automotive cash cows. Analysts figure that F-series trucks, with top-shelf trim lines like King Ranch and Platinum, generate gross profits of 40% per unit, or $12,000.
Trucks are ridiculously overpriced.  $12,000 profit?  People are stupid.  I also thought this piece was interesting:
At the Dearborn Truck Plant, one of two assembly plants where the F-150 will be built—the other one is just outside Kansas City—the company is spending hundreds of millions of dollars to build and install new stamping presses and dies to produce the aluminum panels and replace today’s spot welders with rivet guns, advanced welders, and adhesive machinery in the body shop. With both plants currently producing the 2014 F-150, they will have to be taken down one at a time for a total of 13 weeks for refitting, depriving Ford of perhaps $2 billion in revenue.
Ford has guessed wrong on a new truck before. When the 1997 F-150 was redesigned from the ground up for the first time since 1980, it got uncharacteristic rounded styling—a “jellybean look”—that allowed for improved aerodynamics, a larger interior, and better fuel economy. Designed to “hit the hot buttons” of baby boomers, it sold quickly at first (1.1 million in 2001), but the style didn’t catch on, and Ford retreated back to a chiseled box look in 2004.
The main challenge with the aluminum will be manufacturing quality and durability.  That is a lot more manageable than style.  If they are going to fail with the move to aluminum, it will be because trucks fail structurally.  Otherwise, customers won't know the difference between the aluminum and steel.

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