OM in the News: Recycling and the New Ford F-150 Truck

Scrap from the F-150 is shredded and shipped back to suppliers to be turned into new sheets
Scrap from the F-150 is shredded and shipped back to suppliers to be turned into new sheets

Ford’s decision to build a lighter-weight pickup truck using aluminum body-panels has been billed largely as a way to achieve better fuel economy, reports The Wall Street Journal (Dec.17, 2014). It is also a recycling play. The 2015 F-150, perhaps the most important vehicle to hit Ford dealerships in decades, goes on sale this month. By the time a new truck exits the factory and heads for the showroom, it will have left behind $300 worth of scrap aluminum on the plant floor.

That scrap is collected, cleaned, and sent back to the aluminum plant on the same trucks that delivered it fresh—creating what CEO Mark Fields calls a “closed loop” that helps offset the expense of building its best-selling vehicle with a material that is far pricier than steel. “Every single scrap of aluminum is reused,” says Fields.

Every day, 50 semi tractor-trailers drive out of Ford’s F-150 plant in Dearborn, Mich., with thousands of pounds of shredded aluminum, scrap that was stamped out of 6-foot-wide aluminum rolls used to make F-150 body panels. Only 60%-65% of a roll is actually used in the stamping process because many body panels have big holes, such as windows. Ford installed systems to separate the six different aluminum alloys it uses and return them to mills in Iowa or New York, to be turned back into aluminum sheet for delivery to its Dearborn stamping plant. Ford’s aluminum recycling system, installed as part of a $359 million overhaul of the Dearborn factory, allows the company to recoup up to $300 a truck, helping offset about 20% of its higher production costs.

Classroom discussion questions:

1. Why was an aluminum F-150 a big risk for Ford?

2. What is a “closed-loop” system?

OM in the News: Ford’s Epic Gamble on Aluminum

Alcoa's Iowa plant has expanded to meet the growing need for aluminum in the auto industry
Alcoa’s Iowa plant has expanded to meet the growing need for aluminum in the auto industry

Ford has a long-term plan to unify its global manufacturing, writes Fortune (July 24, 2014). But profits depend largely on a beefy truck that is sold only in N. America and will never find a market in Asia or Europe. Not that it needs to. The F-series has outsold every other car and truck in the U.S. for 3 decades, with some 33 million out the door. So when Ford decided in 2009 to fundamentally change the product it advertises as “Built Ford tough” by making it with a lightweight aluminum body, it was messing with a uniquely valuable franchise. Ford figured the change could reduce the weight of the F-series by 700 pounds, significantly improving its fuel economy (US standards require a fleetwide average of 54.5 mpg by 2025).

But aluminum is more expensive than steel, more complicated to assemble, and more difficult to repair. The changeover from steel would mean alterations to nearly every phase of the business. Aluminum can’t be easily welded and must be riveted and bonded with adhesives. New suppliers would have to be found and validated, plants refitted, production techniques changed, repair technicians hired and trained. Importantly, the changeover to the 2015 models would have to be extended, slowing production and denting profits. “It will be magic or tragic,” says the CEO of AutoNation.

Adds Ford’s CEO, “We had three alternatives: make incremental changes to the existing truck, add more aluminum parts, or make it all aluminum.” Ford created 4 work teams to investigate what it saw as the big unknowns surrounding aluminum: availability, manufacturability, serviceability, and likability. At the Dearborn Truck Plant, one of 2 plants where the F-150 will be built, the company is spending hundreds of millions of dollars to build and install new stamping presses and dies to produce the aluminum panels and replace today’s spot welders with rivet guns, advanced welders, and adhesive machinery in the body shop. With both plants currently producing the 2014 F-150, they will have to be taken down one at a time for a total of 13 weeks for refitting, depriving Ford of $2 billion in revenue.

Classroom discussion questions:

1. How is Ford’s production process changing?

2. What are the risks the company faces?