Ford F-150 Seen Borrowing Military Armor to Shield Profit

Staff Writer
Columbus CEO

(c) 2013, Bloomberg News.

SOUTHFIELD, Mich. — There are beer cans, and then there are Humvees. Ford will take pains to show its new, aluminum F-150 pickup has more in common with combat vehicles.

Ford will debut an aluminum F-Series — its anticipated and high-stakes redesign of the top-selling pickup in history — at next month's Detroit auto show, according to people familiar with Ford's plans. The automaker has asked Alcoa Inc., which makes aluminum blast shields for battlefield-bound vehicles, to lend some of its military-grade metal for the automaker's display, said one of those people, who asked not to be identified because the plans are secret.

Ford's sales job will be considerable: The company is eager to demonstrate the toughness of aluminum, which is lighter than steel, to pickup buyers who've made F-150 the bedrock of its business. Any snafus would weigh on earnings that Ford already is projecting will decline next year and add to the challenges facing Mark Fields, likely the company's next chief executive officer. At last year's Detroit show, he pledged that Ford would take as much as 750 pounds (340 kilograms) out of its next- generation trucks to meet tightening fuel-economy regulations.

"This is already the most significant debut at the auto show," Joe Langley, a production analyst for researcher IHS Automotive, said in a telephone interview. "Everybody's going to be dissecting that thing for a long time, especially since Ford will be taking such a big gamble."

The new F-150 represents a profound reimagining of a cornerstone for Ford and American automaking since the Dearborn, Mich.-based company began building F-Series trucks in the late 1940s. By January, the pickup line will become America's best-selling truck for 37 years and its best-selling vehicle, period, for 32.

The rollout isn't expected to be easy. Manufacturing experts and steel-industry advocates say that moving to aluminum will require fundamental changes to how Ford truck bodies make their way down the assembly line.

Ford is adding thousands of salaried workers including technical engineers to support new-product introductions and assigned Fields, 52, the task of honing its processes after recent bungled rollouts have cost the company lost sales and expensive recalls.

The complicated switch to aluminum from steel in the F-150's body contributes to IHS Automotive's estimate that Ford will need to take about six weeks of downtime at each of its truck plants to retool and swap out robots and machinery.

As a transformative product with a potentially troublesome introduction, the new F-150 has drawn comparisons with Boeing's 787 Dreamliner — an aircraft developed under the company's commercial airplane chief at the time, Alan Mulally, who in 2006 became Ford's chief executive officer.

With the 68-year-old Mulally considered a candidate for the CEO job at Microsoft, the F-150 looms as a big test for Fields: The most important of the 16 new or refreshed models Ford plans to introduce in North America next year, triple this year's number.

Fields has spent much of his time since being promoted to the company's No. 2 role a year ago to prepare for those introductions, said Chief Financial Officer Bob Shanks. A year ago, Fields revealed a design concept called the Atlas, with a brawny exterior look that Ford will retain with the new F-150, according to one person familiar with its design.

Using aluminum to cut weight would help meet rising fuel- economy standards in the United States, which is requiring a fleetwide average of 54.5 miles per gallon by 2025. Overseas markets are introducing similar mandates, including the Middle East, where sales of F-Series trucks have doubled since last year.

Ford builds F-150 pickups at two factories: one near its headquarters and another in Claycomo, Mo., about a five- hour drive southwest from an Alcoa plant in Davenport, Iowa, which supplies super-strong aluminum to the defense industry and other grades for automakers. Larger F-250 to F-550 trucks are assembled in Louisville, Ky. Monica Orbe, an Alcoa spokeswoman, declined to discuss Ford's auto-show display.

The second-largest U.S. automaker has begun building prototypes of the model that will debut in Detroit, according to two people familiar with the matter. IHS Automotive estimates that the truck will go on sale in the second half of next year.

Boasting a massive front end and thick chrome bars across a grille accented by narrow LED headlamps, the Atlas concept truck was lowered from the roof of the Joe Louis Arena in a press conference on the first day of this year's Detroit auto show. Ford has scheduled an early morning press conference Jan. 13 at the stadium for the 2014 show, without making an official announcement of what it plans to unveil.

The next-generation F-150 will offer a new 2.7-liter EcoBoost engine, part of a family of powertrains that Ford has code-named Nano, two people said. The smallest available engine in the outgoing model pickup is a 3.5-liter EcoBoost.

Part of aluminum makers' pitch to automakers has been that the material will let them cut weight in two ways. The first comes by substituting their lightweight material in hoods, doors and other parts of the body.

The lighter body then allows other components such as fuel tanks, brakes and powertrains to also shrink, all while maintaining or improving driving performance and fuel economy, according to companies including Alcoa and Novelis Inc.

The upcoming F-150 will push Ford's pickups closer to a 30 mpg highway rating, two people said. The top-rated truck in the F-150 lineup for the 2014 model year is 23 mpg highway.

A 10-speed transmission that Ford is developing with General Motors and the light-duty truck hybrid systems that it collaborated on with Toyota for research and development are two technologies that could boost Ford's trucks to the 30 mpg highway rating threshold, two people said.

"We think that the F-Series will effectively re-write the competitive standards for the full-size truck market," Eric Noble, head of auto-consulting firm The Car Lab in Orange, Calif., said by telephone.

Both the F-150 and Boeing's 787 Dreamliner are "innovative products using lightweight materials that push the envelope relative to competitors," Brian Johnson, an analyst at Barclays, wrote in a recent report.

Johnson said he asked Ford whether the new F-150 ran the risk of production stumbles similar to those experienced by Chicago-based Boeing. The 787 was three years behind schedule and hasn't broken even.

While Ford had said it was confident in its manufacturing abilities, the forecast that it will earn $7 billion to $8 billion next year, after an estimated $8.5 billion pretax profit for 2013, led him to wonder if he was "on to something," he said.

Since becoming COO, Ford's Fields has implemented and led a Wednesday morning meeting to review the metrics of Ford's upcoming introductions, which are attended by company leaders in sales, product development, quality, manufacturing, purchasing and marketing.

The aim is to avoid a repeat of messy new-model entries in the same vein as Ford's Escape utility vehicle, which has been recalled seven times since its debut in the first half of last year.

Ford last week said that it will pay as much as $300 million in warranty expenses in 2013, primarily because of recalls of Escapes with 1.6-liter engines, which risked catching fire because of oil and fuel leaks.

The process of ramping up to build F-150s using substantially more of the lightweight material will be more daunting because of its truck lineup's scale. Ford is on pace to sell more than 750,000 F-Series pickups in the U.S. this year. It has delivered 175,490 Explorers, including police versions, through November.

"F-150 is a very key product, and some of the changes they're talking about this time do elevate the risks in terms of getting that right," said Warren Gibbon, a fund manager at Standard Life Investments, which manages $290.8 billion including Ford and GM shares. "They should be able to pull it off."

_ With assistance from Sonja Elmquist in New York.