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dokdog 2 posts  |  Last Activity: Mar 28, 2015 6:39 PM Member since: Oct 22, 2001
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  • Ford Motor Company (NYSE: F ) is at the leading edge of this shift, using aluminum to reduce the weight of its uber-popular F-150 pickup. Now the Blue Oval and other companies could get a boost from the Department of Energy, which this week announced a conditional commitment for $259 million in funding to enable Ford's aluminum supplier, Alcoa (NYSE: AA ) , to expand its manufacturing capacity. This loan would keep Alcoa's costs down so it can provide affordable aluminum to automakers.

    Stimulating investment
    The funding would come from a DOE loan program established in 2011 to support the development of advanced technology vehicles. The Advanced Technology Vehicles Manufacturing, or ATVM, initiative is part of an often-maligned $25 billion DOE loan program that funded flops such as Fisker Automotive and Solyndra, as well as successes including Tesla Motors and Ford itself. However, due to past criticisms the program has been retooled, with the ATVM program announcing a number of improvements last year, including clarifying the eligibility of component suppliers such as those that make lightweight materials, like Alcoa and aluminum.

    The $259 million conditional loan commitment (which is an important step toward receiving a loan from the DOE) to Alcoa is the first since those improvements were announced. If finalized, it would provide the company with capital needed to expand its plant in Tennessee, where it makes high-strength aluminum for vehicle manufacturers that are using the material to reduce the weight (and thus improve fuel efficiency) of their vehicles. The expansion is expected to create 400 construction jobs and 200 permanent full-time jobs at the facility.

    Aluminum is built Ford tough
    For Ford and other automakers, using aluminum is a game changer for fuel efficiency. By using an all-aluminum alloy instead of steel for the body, Ford shed more than 700 pounds from its latest F-150, about 15% of the vehicle's body weight. That switch has the potential to boost fuel economy by 5% to 20% depending on the model. Not only does that save consumers a bundle on gas, but it's also better on the environment, as improved fuel economy cuts down on greenhouse gas emissions. In fact, according to a study by the Automotive Science Group, the new F-150 has the lowest life-cycle carbon footprint among pickups.

    U.S. Energy Secretary Ernest Moniz, at left, experiences the all-new Ford F-150. Source: Ford Motor Company.

    The aluminum Alcoa is providing Ford and other automakers isn't the same stuff used to make soda cans, but instead is a high-strength, military-grade aluminum. Pound for pound, this material can actually absorb twice the crash energy as steel, making it safer in an accident. Aluminum also performs differently than steel during a crash, dissipating energy and directing it away from the vehicle's occupants. Finally, bringing a vehicle's weight down shortens the stopping distance and provides drivers with better handling and performance. Put another way, this material is clearly Ford tough.

    Investor takeaway
    While the Department of Energy's loan programs haven't always paid off, the changes made to the ATVM program to allow it to fund initiatives such as Alcoa's expansion could work out very well for all stakeholders. It will provide the company with secure funding to increase the capacity of a plant that is expected to see surging demand in the years ahead as Ford and others vehicle manufacturers put more aluminum in cars and trucks. This is a real win-win, as aluminum is proving to be a real game-changing material for the auto industry.

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    Matt DiLallo has the following options: long January 2016 $10 calls on Ford and short May 2015 $15 puts on Ford. The Motley Fool recommends and owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

    Read/Post Comments (5) | Recommend This Article (1)

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    Report this Comment On March 28, 2015, at 2:19 PM, regotoguy wrote:
    It would be nice to know the terms of the loan. What advantage is it to Alcoa if the interest rate is the same as a bond offering? BTW, I believe Alcoa will easily beat the S&P index for a long time to come.

    Report this Comment On March 28, 2015, at 4:28 PM, lem2004 wrote:
    Fords F-150 gets $259 million boost from Uncle Sam?... Very misleading and sensationalized head line.Alcoa may get the loan not Ford,and Ford is not the only auto company that uses aluminum in their products.

    Report this Comment On March 28, 2015, at 4:39 PM, Easttexas9 wrote:
    2015 Chev Silverado gets 24mpg highway with 4.3L V6 and steel body. So the 2015 puny 2.7L Ford gets 26 mpg and that's supposed to be a big deal?

    Report this Comment On March 28, 2015, at 5:02 PM, windell wrote:
    The new F-150 is a great truck but fuel effiency is not much different than the steel counterparts.The ram V6 non-turbo with 305 Hp. gets 25 MPG .

    Report this Comment On March 28, 2015, at 6:14 PM, Jason87467 wrote:
    Ford bragged over a year ago that the new aluminum truck would break the 30 mpg, but that has not happened. It does not even get close to that.

    Other truck builders, GM, has lowered the weight by using other methods, like nano steel, but are not rewarded for doing so. Something is not right here.

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    72 cent loss for 2014 Kudos!

    by cepheid06 Jan 29, 2015 5:21 PM
    dokdog dokdog Jan 29, 2015 7:04 PM Flag

    AMZN…..$354.92 per share…..EPS…….(0.47)

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