Aluminum turns the corner

Automotive Design & Production, June, 2004

Alcan Inc. executive vice president Dick Evans says aluminum has "finally reached a critical mass in the automotive industry." After years of pushing aluminum toward the OEMs in hopes that they would add it to a vehicle's bill of materials, "we find ourselves in the 'push' mode where we are now responding to requests from both OEMs and suppliers. In fact," says Evans of aluminum, "we see sustained growth and displacement of steel at above GOP levels in the long-term."

The run-up in steel prices has helped change the perception in the auto industry that the price of steel never changes, and opened OEM eyes to the ability to hedge the long-term price of aluminum via the London Metals Exchange (LME). "You can now hedge the price five years ahead on the LME," says Evans, "and futures prices are lower than today's. Either the customer, or Alcan, can hedge off the LME price or on a formula with a pass-through of increases or decreases in the price, depending on the customer's needs."

Evans expects aluminum growth in North America to follow the pattern first seen in Europe: "The technology is transferring from the European arms of the world's automakers into the North American market," he says. The progression in the use of aluminum should follow a predictable pattern: bumper systems (beams and crush structures) give way to instrument panel support beams, and are soon followed by engine cradles and suspension subframes. But while European buyers are more than willing to pay a premium for the performance advantage conferred by the lighter material, North America traditionally has been a more price sensitive market. "Despite what many in this industry might believe, we actually are seeing less concentration from the OEMs on price, and more of a concentration on the performance differential aluminum can give to a vehicle," says Evans.--CAS