Ford has completely remade its best-selling F-150 for 2015 in a quest to stay ahead of tough government fuel-efficiency mandates. (Ford)
As Detroit’s auto industry crumbled in 2009, Ford Motor Co. managed to spin a profit for the first time in four years and secretly began to gear up for its most radical revamp of the legendary F-150 pickup.
Today, in one of the biggest product gambles in the company’s 111-year history, Ford unveiled its aluminum-bodied 2015 F-150 in a move that could revolutionize the U.S. truck market but could also jeopardize the profitability of the automaker’s biggest cash cow. The key to the multibillion-dollar, five-year project is that Ford was able to avoid bankruptcy — and backed by a $23.6 billion loan, it had enough money to complete the overhaul.
“The fact we had funds to do that was important,” Mark Fields, Ford’s chief operating officer, said in an interview. “We wanted to make sure we had a full pipeline of vehicles when the recovery started. When you look at F-Series, clearly it fit into our timing for the need for a next-generation vehicle.”
In what could register as the second-largest aluminum contract in the U.S. outside the military, Ford and suppliers have completely remade the best-selling vehicle in North America in a quest to stay ahead of tough government fuel-efficiency mandates.
Raj Nair, group vice president of global product development for Ford, said at the unveiling of the truck Monday, “The rock-solid frame and body are what set this truck apart. The body is made of a high-strength aluminum alloy that’s lighter and more resistant to dents and corrosion. Overall, as much as 700 pounds of weight have been saved, helping the F-150 to tow more, haul more, accelerate quicker, stop shorter, all with better gas mileage.”
Ford’s bold move isn’t guaranteed to work. And the stakes couldn’t be higher, considering that the F-Series is the most profitable mass-market nameplate on the planet.
“This is like someone betting their house, car and first-born child,” said Dave Sullivan, an auto analyst at AutoPacific Inc. “This is uncharted territory for anyone.”
Here’s the advantage that Ford now holds: Despite the F-Series trucks being older than the new GMC Sierra, Chevrolet Silverado and Dodge Ram — the four account for 82 percent of all U.S. pickup sales — Ford managed last year to stretch its market share lead to its widest margin in 15 years.
Sales is only one barometer of success. The other is profits.
Analysts say F-Series trucks pad Ford’s bottom line by $10,000 for each one sold. Ford’s initial investment into the latest F-150 renovation totals in the billions, including $1.8 billion at assembly and stamping plants in Michigan and Missouri. And the automaker will pay a heavy cost to buy enough aluminum necessary to build more than three-quarters of a million trucks annually.
Ford has quietly stated for months now that its bloated profit margins — which at one point last year topped 12 percent versus an industry average of about 6 percent — aren’t sustainable. CFO Bob Shanks last month warned that Ford’s global profit will likely fall this year to $7 billion or $8 billion next year from about $8.5 billion in 2013, due in part to costs associated with the new truck.
Lack of funds hurt rivals
Bankruptcies five years ago altered truck plans at GM and Chrysler but didn’t deter Ford. General Motors Co., the No. 2 seller of pickups in the U.S., last year overhauled its trucks and stuck with steel. Chrysler Group LLC, a year before that, did the same.
The reason they didn’t turn to aluminum has little to do with potential growth of midsize pickups or the idea that customers won’t accept an aluminum-bodied truck. The reason is that five years ago, neither GM nor Chrysler had the cash during the early planning stages of their new trucks on the road today.
“Given that they did go bankrupt, how could they?” said David Whiston, a financial analyst at Morningstar Inc.
Armed with a $23.6 billion loan — the “largest home improvement loan in history,” as CEO Alan Mulally called it — Ford had the finances to pursue the costly enterprise. Mulally, at a time when competitors cut back spending on new products, insisted that Ford reinvest for the next big U.S. car and truck boom.
One of those vehicle programs financed with the loan was the 2015 Ford F-150, a vehicle so considerably different than its competition that it can’t and won’t be mimicked for at least a few years — possibly more.
“It comes back to our mindset of product excellence and not just how competitive we can be,” Fields said. “One of the things that was absolutely clear is customers wanted better fuel economy in their pickup trucks. And they wanted capability; they didn’t want to trade off.”
Less weight, better mpg
Ford had the cash to invest in a comprehensive truck modernization, but that didn’t mean it was ready to spend wildly. In fact, Ford took a very analytical approach to the truck revamp.
Eighteen months prior to the start of the new F-150 program, the truck and materials teams began to look at the U.S. truck market and how it could innovate the F-150 without compromising the loyal truck base it had built during the previous three decades. Their goals: the most fuel-efficient, durable and diverse pickups in the market.
Ford ran about 100,000 computer simulations detailing varying truck sales volumes, sizes, powertrains and materials, and came to one conclusion: They needed to take weight out of the vehicle.
The 40th-anniversary F-150 will be up to 700 pounds lighter than the current truck. About 70 pounds of weight savings are the result of a new, high-strength steel chassis; the rest come from an all-aluminum body and bed. In the trucks currently on dealer lots, the hood is the only body component made of aluminum.
Ford also will introduce a new EcoBoost engine — a 2.7-liter turbocharged six-cylinder — that could push fuel efficiency numbers close to 30 miles per gallon, though Ford isn’t yet offering estimates. Fuel efficiency will also be aided by standard active grille shutters, which will automatically open and close to reduce aerodynamic drag.
Ford also hasn’t revealed pricing on the new truck, but Doug Scott, truck marketing manager, said the it will remain affordable. Scott also hinted that Ford won’t shy from using the word “aluminum” in marketing campaigns.
Pete Reyes, chief engineer of the F-150, said in an interview that Ford’s new truck represents a big step forward for the industry. But he has no reservations about the changes.
“This is radical,” he said. “We’ll style it again, but this is the foundation.”
Phil Berg contributed to this report.