One fascinating thing about business, at least in my opinion, is how visionaries and great forward-thinking companies typically thrive and change the world. Spoken like a true business nerd, I know -- guilty as charged.
That's why Ford Motor Company's (NYSE:F) revolutionary approach with its 2015 F-150, which used aluminum body panels to drastically reduce weight while improving fuel economy and towing capability, was a risky and exciting decision. If the gamble pays off, it'll be a huge win and put Ford at the forefront of the next big trend.
Is this just the first step? Is Ford planning to apply this strategy to the rest of its vehicle fleet, with increasingly strict CAFE and fuel-efficiency standards on the horizon?
It's possible Ford could adapt the aluminum strategy for its vehicles, and it wouldn't be the first time that aluminum was used in passenger cars, although it's never been done in huge volume. After all, it's clear that even as gas prices plunge, fuel economy will still be the most important factor when consumers head to dealership lots to pick out their new rides, which gives a lighter-weight aluminum strategy some merit at first glance.
Just last week, J.D. Power and Associates released a survey that showed new-vehicle buyers ranked fuel economy as the most influential factor when selecting a vehicle, which made it the fourth consecutive year that fuel economy was No. 1.
"Consumers know that, although gas prices are low today, the cost of fuel will likely increase during the time they own their vehicle," said Arianne Walker, senior director, automotive media and marketing at J.D. Power, in a press release. "Clearly, consumers are considering the total cost of ownership when selecting their new vehicle."
So with Ford diving into aluminum with its most important product, is the rest of the lineup going to follow? Not likely, according to executives at Ford.
Aluminum isn't the ultimate answer
There are a couple of reasons that Ford's use of aluminum could ultimately stop with the F-150. First, one of the huge benefits of making a full-size truck lighter by using aluminum in certain places instead of steel is that it improves the capability of the truck -- giving it better towing capability, for instance. Those benefits don't translate to passenger cars because the need for towing isn't there.
Second, working with aluminum is more expensive and more difficult during the manufacturing process. When you take that in combination with the additional costs of switching to factory machinery that can work with aluminum, very few vehicles carry the price tag and margin worth the effort of switching. As Ford's F-Series is the company's most profitable product, it's one of very few Ford products, if not the only one, that can make the switch and remain very profitable. It's also the product that would benefit most in terms of performance, which could become a competitive advantage.
Investors who have bought into Ford's turnaround are all ears for a strategy that highlights fuel economy, especially as it remains a critical factor to consumers. Aluminum may not be the answer to improving the competitiveness of Ford's entire passenger car fleet, but investors can rest assured that the Dearborn automaker's vehicles will continue to see innovation and improvement, and will ultimately be more competitive in the years ahead -- take the automaker's recent dive into carbon-fiber applications to reduce weight as an example. Ford's continued focus on innovation and fuel-efficient rides is good news for investors holding the stock for the long run. As Ford continues to roll out fresh designs of popular vehicles, and improves its fuel economy, market-share gains and improved profitability will follow.