Why the New Aluminum 2015 F-150 Will Cost Ford 90,000 Sales

The all-new 2015 F-150 is an expensive gamble for Ford, in more ways than one. Source: Ford Motor Company

Ford (NYSE: F  ) said this week that it will lose production of more than 90,000 F-Series pickups as it converts its factories to produce the all-new aluminum bodied 2015 F-150 later this year.

That's a substantial loss for Ford. The F-Series is Ford's best-selling vehicle in North America, and its most profitable product anywhere; 90,000 units is over a month's worth of sales under normal conditions. 

What's going on? And will this be worth it?

Big changes to factories mean big downtime, and a lot of lost production
Ford North America chief Joe Hinrichs told reporters this past week that Ford's sales, market share, and profits would likely fall this year as a result of the shutdowns required to convert Ford's truck factories in Dearborn, Mich., and Claycomo, Mo., to produce the new aluminum truck.

That's a big cost for Ford, but it's evidence of how seriously the company is taking its preparations to produce the all-new truck.

I spoke to Hinrichs about Ford's preparations for the all-new F-150 a few weeks ago. He told me that one thing that makes this different from a normal new-model changeover is that Ford will have to substantially retool the plants' body shops in order to assemble the aluminum trucks. 

Unlike the steel body panels on Ford's current pickups, the new F-150's aluminum body panels are bonded -- glued, essentially -- and riveted. This is a brand-new thing for Ford's workers, and it requires all-new equipment.

Joe Hinrichs is Ford's President of the Americas -- and a top vehicle-manufacturing expert. He recently spoke to The Motley Fool about Ford's preparations for the all-new F-150. Source: Ford Motor Co.

Much of that equipment has been designed from scratch for Ford, Hinrichs said, specifically for this application. While building cars with aluminum body panels isn't a new process, the scale  of what Ford is doing is unprecedented in the industry.

Up until now, most aluminum-bodied vehicles have been luxury cars, made in limited numbers. No factory has ever built modern aluminum-bodied vehicles at the pace Ford builds trucks, Hinrichs told me: 60 trucks an hour, 22 hours a day.

Ford has done an "enormous amount" of testing to ensure that the new equipment and processes will work at the pace Ford requires, Hinrichs said, on top of the extensive testing that Ford has done of the new truck itself. He's very confident that the new F-150's launch will be smooth.

But Ford is determined to take the time to get it absolutely right -- and to lose profits in the near-term to ensure that they can take the time. 

The plant shut-downs are happening in stages: The two factories were shut down for three weeks in the first quarter, they'll be shut down for another three weeks in July, and then there will be seven more weeks of downtime by the end of the year.

A lot of lost revenue -- but Ford is already moving to offset it
I can't tell you exactly how much it'll cost Ford to give up 90,000 pickups' worth of production. The profits that an automaker makes on any given model are among the industry's most closely guarded secrets.

But we do know that these are Ford's most profitable products. We could easily be talking $500 million or more, spread out over the rest of 2014 and into early 2015. 

That's a big hit, but Ford is already taking some steps to offset it. Sales of the F-150 were down 4.3% last month, a surprise given that General Motors (NYSE: GM  ) and Fiat Chrysler (NASDAQOTH: FIATY  ) both posted solid gains in pickup sales.  But Ford officials said that the drop was planned. 

How do you "plan" a sales decline? In the pickup market, you do it by juggling your incentives. For now, Ford is keeping its incentives lower than those of key rivals. 

That increases profits per vehicle, but it means that Ford will lose some sales to price-conscious buyers. But it also raises the chances that the sales Ford and its dealers are losing are less profitable ones.

The new trucks are a bigger bet for Ford than we thought
Ford CFO Bob Shanks warned us back in December that Ford's 2014 profits would be lower than last year's because of the costs of new-product launches. By the end of the year, Ford will have launched 16 new or refreshed products in North America alone, and several more in other parts of the world. 

Ford's elaborate testing of the new aluminum F-150 included secret on-the-job testing of its aluminum cargo box at a gold mine in Nevada. Source: Ford Motor Co.

That's a high number, and Shanks warning made some sense at the time: New-product launches aren't cheap. But Shanks may have had this particular launch in the forefront of his mind when he gave his guidance: It's really not going to be cheap.

But that guidance is helpful to remember now. I don't think that Ford shareholders need to worry too much about Ford's lost pickups, because I think they've long since been priced into the stock: We were warned, months ago. 

But with all we've said about the risks of Ford's bet on an aluminum pickup, this revelation gives us a closer look at just how much Ford is betting on these new trucks.

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Read/Post Comments (32) | Recommend This Article (42)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 08, 2014, at 6:11 PM, TelsaRowe wrote:

    Pure ignorance. I own a contruction business and everyone cannot wait to get one. Ford will sell every one they make. "Warned of lower sales" and let me guess, you were stupid enough to believe it. Underpromise and over deliver. This will be fords best selling launch ever and will hurt gm and chrysler considerably. Just another dime a dozen doom and gloom clickbait title.

  • Report this Comment On June 08, 2014, at 6:35 PM, Yogurt30 wrote:

    Huh?

    "I can't tell you exactly how much it'll cost Ford to give up 90,000 pickups' worth of production. The profits that an automaker makes on any given model are among the industry's most closely guarded secrets.

    But we do know that these are Ford's most profitable products. We could easily be talking $500 million or more, spread out over the rest of 2014 and into early 2015."

    90000 pickup trucks @ 50,000 dollars each PROFIT equals 450 million dollars.

    I highly doubt Ford makes 50 thousand dollars in profit (probably not even 20k) so where are we "easily talking 500 million"?

    Even if we were talking revenue and not profit, it is difficult for each truck to cost 50k and it still is 50 million short of 500.

  • Report this Comment On June 08, 2014, at 6:47 PM, Fiat500S wrote:

    I'm going to love this new change, here comes the payback for all the times some dbag in a truck whacked the door of my car and left a nice dent and crease in the fenders and doors, then drove off without caring about the damages in the aftermath of their stupid looking, redneck selves that couldn't operate a car door. And don't get me started on the Wal-Mart grocery cart they can't operate either without destroying your car.

  • Report this Comment On June 08, 2014, at 6:47 PM, 2smartforlibs wrote:

    My dad has never owned a bad ford f150 I have never owned a good ford. I think junk is and always will be junk.

  • Report this Comment On June 08, 2014, at 7:38 PM, NCtides88 wrote:

    @Yogurt...check your math...90,000 trucks at $50,000 profit is 4.5 Billion...

    90,000 trucks at $5,500 profit is around 500M.

  • Report this Comment On June 08, 2014, at 7:43 PM, GeaugaTruck wrote:

    If only they would make the cab out of aluminum too, rusting Fords would be a thing of the past.

  • Report this Comment On June 08, 2014, at 7:46 PM, JohanStrauss wrote:

    The F-150 is dead.

  • Report this Comment On June 08, 2014, at 8:04 PM, betterthanhoney wrote:

    I would rather have a light weight non rusting alumminum truck thats good on gas. Id buy one

  • Report this Comment On June 08, 2014, at 8:44 PM, dolfan1 wrote:

    The headline seemed to suggest that people wouldn't buy the new model, and I was ready to dispute the claim. Headlines are such "click bait".

    I'll bet Ford will actually have to Ramp up production to meet demand. Read another article that stated Ram is threatening Ford's sales (percentage off sales growth, not units sold). It won't happen. Ram will NEVER overtake Ford truck sales, nor Chevy/GMCs for that matter. High strength aluminum alloy will be the future of automobiles and everyone else will have to play catch-up.

  • Report this Comment On June 08, 2014, at 9:09 PM, bzerked wrote:

    gequga.. .the entire body is aluminum, front to back

  • Report this Comment On June 08, 2014, at 9:18 PM, xxxttttyyy wrote:

    Obama will ban all aluminum by 2015 it is a major cause of global melting

  • Report this Comment On June 08, 2014, at 9:31 PM, chucky001 wrote:

    If aluminum is so great, why are aircraft makers like Boeing and Airbus abandoning it in favour of composites? Like what's used in the Chevy Corvette? Does GM have something up its sleeve?

  • Report this Comment On June 08, 2014, at 9:38 PM, Dolittle1 wrote:

    I wish Ford would bring back the small Ranger pick-up and make it out of aluminum.

  • Report this Comment On June 08, 2014, at 9:50 PM, bpainter wrote:

    I am waiting on the 2015 Colorado I don't need or want a large truck and could give a rip about aluminum.

  • Report this Comment On June 08, 2014, at 9:59 PM, lovettstough wrote:

    I'm going with the full size Toyota Tundra next. Toyota is the best quality vehicles out there.......cars & trucks.

  • Report this Comment On June 08, 2014, at 10:19 PM, ktbonner wrote:

    Chucky,

    composites, carbon fiber in the case of Boeing and Airbus, work great on a multimillion dollar aircraft, but would make a truck far too expensive.

    Corvette uses simple fiberglass, same as used on boats since the 1950s.

    Confusion arises because 'composite' is a buzzword, Since all composite means is 'made of two or more materials', it can be used for almost any product. A well known window manufacturer uses 'composite frames' in advertisements because it sounds much more impressive than 'vinyl wrapped wooden frames'

  • Report this Comment On June 08, 2014, at 10:37 PM, 845yankeegirl wrote:

    The hood and hatch of 2007 Expedition were aluminum and Ford had no concept of how to get the paint to stick. Hope they have the kinks worked out.

  • Report this Comment On June 08, 2014, at 11:12 PM, crash3085 wrote:

    Like the F-150s of past, this truck will sell like crazy. Not only will it continue to be the best choice for people who want a larger pickup (but not huge) that is comfortable and reliable, but it will be the fleet pickup of choice. Now if Ford would just bring back a new and improved Ranger.

  • Report this Comment On June 08, 2014, at 11:20 PM, fhjohnson1 wrote:

    The one thing I don't hear anybody talking about is HOW LONG will it take for body shops around the country to be certified/trained by Ford to be able to repair the aluminum panels on these new trucks?

    It seems that, at least for the first couple of years, ONLY Ford body shops will be able to do ANY repairs to wrecked aluminum trucks. This will mean VERY expensive repair jobs by the Ford stealerships. Will this also mean higher premiums being paid if you have a new aluminum Ford truck??

  • Report this Comment On June 08, 2014, at 11:38 PM, martinbay24 wrote:

    Rivets... Aircraft build approach? Ford CEO Alan Mulally is the former EVP of Boeing.

  • Report this Comment On June 09, 2014, at 12:20 AM, jessiej wrote:

    so did nobody take into account that maybe they built a bunch of extra trucks to take into account the loss of production so it wouldnt affect sales? ie, there may not be a shortage if they have enough to cover future sales untill the factory is back online. at least thats what any smart business person would do.

  • Report this Comment On June 09, 2014, at 12:48 AM, NoVaEarly wrote:

    fhjohnson1, no legitimate repair shops do panel repairs anymore. It cost too much at $100+ an hour to attempt repair versus replacement with a brand new panel. Acid etch primer it so the paint will stick like any other paint job, and you are do. No worrying about surface imperfections or future cracks in filler and having to redo repairs under warranty.

  • Report this Comment On June 09, 2014, at 12:49 AM, railcatcar wrote:

    The MERCEDES had aluminum parts, hood, trunk, and doors on my 56 190 SL. Ford is not the first. My 1976 450 SL had Aluminum parts also

  • Report this Comment On June 09, 2014, at 12:49 AM, NoVaEarly wrote:

    fhjohnson1, no legitimate repair shops do panel repairs anymore. It cost too much at $100+ an hour to attempt repair versus replacement with a brand new panel. Acid etch primer it so the paint will stick like any other paint job. No worrying about surface imperfections or future cracks in filler and having to redo repairs under warranty.

  • Report this Comment On June 09, 2014, at 12:52 AM, railcatcar wrote:

    Ford was not the first to put Aluminum parts on the cars. Mercedes been doing this for years, my 1956 had aluminum

  • Report this Comment On June 09, 2014, at 5:45 AM, mabrock62 wrote:

    I like it! Will the Raptor be all aluminum as well?

  • Report this Comment On June 09, 2014, at 9:12 AM, Jason87467 wrote:

    No more new Ford trucks for me!! Imagined gluing and riveting parts together? My next truck will be a Chevy.

  • Report this Comment On June 09, 2014, at 9:23 AM, Jason87467 wrote:

    Someone on this blog says GM does not use composites on their new Vette, and uses fiberglass like they did in the 50's. No so.

    http://www.plasticsnews.com/article/20130114/NEWS/301149949/...

  • Report this Comment On June 09, 2014, at 9:51 AM, donfly wrote:

    Unfortunately, this will cause insurance premiums to go up for the owners. If Ford has to have special tooling, the body shops will have to also. Not to same extent, but the technicians will have to be trained up on it. Then there is the supply problem...body panels, components, etc.

  • Report this Comment On June 09, 2014, at 10:49 AM, BBXTRAD1 wrote:

    Isn't the hoods of most Fords aluminum now? If not, what is it made of? A magnet will not stick to the hood.

  • Report this Comment On June 09, 2014, at 1:15 PM, pair225q wrote:

    I hope that Ford can come up with a shifting mechanism that does not jump out of park into reverse. They did it I the 60s the 70s the 80s &90s and here it is in the teens and still the commercial vehicles have start up drive off problems. Have you ever noticed at the airport everyone has to chock the wheels? Have you noticed the mailman park his truck he turns the wheels toward the curb. Yes that is because they have had so many jump in reverse and back into something.

    Hey Ford you know that drive by wire technology ? How about shift by wire. I don't see many problems with that.

  • Report this Comment On June 09, 2014, at 6:38 PM, txpo2001 wrote:

    If its a Ford I'd buy it. F-150 has been and will continue to be the best for the money. The competition may have a prettier truck, but Ford's durability stands alone.

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