Game on with steel, says aluminum supplier Novelis

Richard Truett
Automotive News
26 January 2015

Phil Martens, 54, CEO of aluminum giant Novelis, knows both sides of the auto metals business. Before Novelis, Martens spent 18 years at Ford Motor Co., including a stint at Mazda, and rose to become Ford's product development chief.

Martens spoke with Staff Reporter Richard Truett about the future of automotive aluminum.

Many people were surprised when the new aluminum-bodied Ford F-150 didn't post better fuel economy ratings. What's your view?
Was I disappointed? To a certain degree, yeah. I think everybody wanted a 30 [mpg] number. But at the end of the day, on a year-over-year basis, they made an incredible step up. If I really look at what Ford did developing the product program, I think the first thing they wanted to do ­; and this was pretty smart ­; they didn't want to make this launch undoable by having all-new powertrains, an aluminum body structure, an all-new assembly line and an all-new supply base. I think Ford did a real smart job of pulling back and separating major powertrain innovations.

I think you have to make a decision how you stage all of this over a five- to six-year period. I don't know their product plan, but I would have to say they are positioned now ­; unequivocally the best ­; to do major things for fuel economy and emissions performance.

Aluminum's battle with steel is not over.
The physical capabilities are so different between the two products. And I don't think the decision is always made specifically on a weight or density comparison. I think it is also made on where automakers are on a variety of things, such as where they are on body shop design or whether it is a global or just a regional architecture. I think the guys in steel, if anything, have realized they have to change, too. I think this whole thing has driven innovation into the industry, and that's going to be good for everyone. I expect a more rapid evolution in capabilities for aluminum in a short time window than I do in steel.

Are low fuel prices bad for aluminum?
I don't think anybody can accurately predict where this will be in a year. This distortion in oil prices happened so fast. So many different things can come out of this. Keep in mind the push for shale oil was for energy security in the United States. I am not sure that will go away. Also, I don't know after the distortion ends how long it will take to use up the surplus.

When do fuel prices cause automakers to start re-examining their product cycles?
That's a tough question. Because the next review [of emissions regulations] is in 2017. Automakers have to make decisions now for 2018, '19 and '20. I don't think they have any other play to go on except for what is written into the law today. That's why I go back to the Ford decision. Ford has no market risk. They control their destiny because they have the architecture.

General Motors joins aluminum sheet by spot welding instead of riveting and bonding, the Ford/Jaguar Land Rover method. Is spot welding the future of aluminum body assembly?
I applaud GM if they can do it that simply. It makes aluminum far more accessible. The one thing about the industry is that these things move around. You can patent it, and the concept, if it really works the way they are doing it, opens up the doors for all kinds of opportunities. But I think it is three factors for aluminum bodies: adhesives, for sure, rivets, for sure, and spot welding, all used on the same vehicle.

When you were at Ford, aluminum was being investigated for the Taurus/Sable and then for Jaguar.Were you surprised that Ford was the first company to go with aluminum on a high-volume, mainstream vehicle?
I wasn't surprised that Ford felt confident enough to do it. I really wasn't. The real learning on aluminum happened with the Jaguar XJ, which was launched in 2004. Jaguar had to do it for survival, to meet the European emissions requirement. Normally when a company buys out another it gets some technology. But this was a reverse case. What Jaguar gave Ford was this incredible learning of the manufacturing side of the business and ultimately the real-world benefits of lightweight vehicle architecture. The benefit that Ford got [from Jaguar] is that it was an incubator on how to bring this into production. I don't see other companies having that learning as deep as Ford does. I think they learned enough capability to say "We can do this."

Can you say if another manufacturer has or will commit to making a high-volume product from aluminum similar to what Ford did with the F-150?
Every automotive company that we interface with is continuing to look at expansion of aluminum. People in North America may not see this, but we at Novelis see it. The rest of the world is progressing rapidly on the emissions side. Fuel economy is important, but emissions are actually more important. As you start looking at the rest of the world, what you are beginning to see is more C, C-D and D class vehicle architectures in high quantities of aluminum. They have to hit all of the global standards, not just those in the North American market.

The way we view the aluminum supply situation is that if Novelis adds capacity, then the company has signed a deal to sell the aluminum. Is that good logic?
That's very accurate. This is not for the faint of heart. This is a big balance sheet business. You have to be very comfortable with the arrangement you have with whatever customer that they're as committed as you. Upfront, as you put in these facilities, you are putting them in in many regards to tailor it to what the customer demands are. There may be some speculative investment, but there is very little. At Novelis, we are very disciplined. When we make an announcement, the capacity is sold out.

Where is Novelis spending its r&;d money?
Right now it is almost ­; I don't want to say 100 percent automotive, but arguably about 75 percent automotive.

What is the relationship between Alcoa and Novelis? Would Novelis do any joint projects with Alcoa?
I think Ford was smart bringing both companies in and saying, "Let's make this happen." I don't see us doing any joint development. I see us jointly competing in a very constructive way, and I think the innovation race is on.