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

Ford is making a big bet on its new truck, in more ways than one.

Jun 8, 2014 at 4:35PM


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

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.

Bigger than aluminum pickups: OPEC is absolutely terrified of this game-changer
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour (That's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's worst nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers