Is this a picture of a truck or the steel industry's demise? Source: Ford.

Ford (NYSE:F) has the automotive industry abuzz with the aluminum-body 2015 F-150. This simple change in materials has the potential to shed up to 700 pounds of the curb weight of the vehicle, which will drastically improve fuel efficiency. As the nation's best-selling vehicle, Ford's move to an all aluminum body is a clear sign that the automotive industry is changing, and it is making steel companies like AK Steel (NYSE:AKS) and U.S. Steel (NYSE:X) sick to their stomachs. Let's take a look at why Ford's move could spell so much trouble for these players. 

When the king moves, the rest shall follow
The benefits of manufacturing vehicles with aluminum are pretty clear. Not only does it make the truck lighter, but it also allows the manufacturer to use a smaller engine without too much compromise on what counts when it comes to these workhorse vehicles, namely towing. All of this translates to better fuel economy, which is a critical element for automotive manufacturers with the new CAFE standards about to kick in. While Ford has not released the MPG numbers for this vehicle as of yet, some estimate that it will boost fuel economy by more than 20%.

This isn't the first vehicle to experiment with other materials, but this is the F-150 we're talking about here. The F-150 is Ford's signature vehicle. It's been the nation's best-selling vehicle for more than 32 years, and represented almost 5% of all vehicles sold in America last year. People pay attention when changes are made to this truck, and General Motors (NYSE: GM) is following suit by planning to roll out an aluminum body truck by 2018, and it has secured major supplier contracts with both Alcoa (NYSE:AA) and Novelis to make it happen.

This is the makings of a major shift in the way we use both aluminum and steel in the U.S. Alcoa estimates that its automotive segment will grow by 600% to $1 billion in sales by 2018 with the addition of GM and other automotive contracts. However, those gains that Alcoa will make in the automotive sector will come at the cost of others, and the ones that will suffer will be steel producers.

Another straw on the camel's back for steel
The current market already wasn't kind to steel manufacturers, so the increased use of aluminum in the automotive industry will only make matters worse. The world's steel market is wildly oversupplied. The current global capacity utilization for steel production has been hovering at a dismal 74%, and domestic producers have been crying foul for quite some time about Chinese steel manufacturers exporting steel below market prices to keep the factories running. 


Steel's major clients in 2013. Source: American Iron and Steel Institute.

One of the bright spots for U.S. steel manufacturers over the past couple years has actually been the automotive industry. Overall, automotive is the second-largest client for steel producers, representing 26% of total shipments. If a major shift toward aluminum were to take place over the next couple years, it would have some pretty drastic effects on the steel market, especially for AK Steel because so much of its sales are dedicated to the automotive industry.

Company Percent of Revenue
From Automotive
AK Steel 45%
U.S. Steel 15%
Nucor 10%

Source: Company 10-Ks.

For AK Steel and U.S. Steel, automotive is simply a customer they cannot afford to lose. Both companies have been hit harder by the downturn on the steel markets much harder than its more nimble peers such as Nucor, and both have not generated a profit since 2008. If major customers such as Ford and GM start to send their business elsewhere, these steel producers could be in for a whole lot more trouble. 

What a Fool believes
The term "game changer" is thrown out quite a bit in the automotive industry, but very rarely does that game-changing event completely change the market dynamics of multiple industries. If Ford is willing to switch its top-selling vehicle over to aluminum, rest assured that several of its other vehicles as well as other manufacturers aside from GM will follow suit. This will likely have a pretty profound impact on domestic steel producers, and companies like AK Steel need to be ready for the possibility that it could lose a significant amount of business from its largest client.

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Tyler Crowe has no position in any stocks mentioned. You can follow him at under the handle TMFDirtyBird, on Google +, or on Twitter @TylerCroweFool.

The Motley Fool recommends and owns shares of Ford. It also recommends General Motors and Nucor. 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.