After F-150 defeat, steel makers plan comeback

DJ Johnson of Severstal North America: “The steel industry has failed.”
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DETROIT - It was a tough few weeks for the steel industry.

Ford Motor Co. won national headlines Jan. 13 when it said that the redesigned 2015 F-150 pickup has an aluminum body.

And now one steel supplier says his industry blew it by not investing in the capacity to produce enough high-strength steel, which steel makers say is lightweight and competitive in price.

This might have prevented the popular Ford pickup from adopting aluminum, said DJ Johnson, vice president of quality, advanced engineering and continuous improvement for Severstal North America.

"The steel industry has failed," he said. "We've been talking as an industry for years about advanced, high-strength steels. But we as an industry haven't invested in enough capacity to do it."

Severstal steel is used in the bodies of the 2014 F-150 and the F-series Super Duty models. The giant Russian-owned steel maker has plants in Dearborn, Mich., and Columbus, Miss.

But a spokesman for the Steel Market Development Institute said companies in the trade group have sufficient high-strength steel for the F-150. Severstal is a member of the group. Ford, he said, chose aluminum to differentiate the pickup from its competitors.

Stakes are immense

The stakes in the aluminum vs. steel showdown are immense. Millions of vehicles in the coming decade could switch from steel bodies to aluminum, particularly if Ford succeeds in casting its "military grade" aluminum as cool.

Johnson said losing the F-150 to aluminum will hurt Severstal's bottom line, but the company is profitable and will remain so after the new F-150 begins production.

Johnson believes Ford will take another look at steel when the time comes for the next redesign.

"I view this as a temporary change," he said of the F-150's move to aluminum. As the industry achieves the tougher corporate average fuel economy standards mandated in the coming decade, automakers will still want to cut costs. And that will keep steel in the game, he said.

But Severstal and other companies must make sufficient high-strength steel for automakers, Johnson said.

The job has two parts. First, the companies must produce the high-strength steel, which are certain alloys that are still strong at thin, weight-saving gauges.

Second, the high-strength steel must be annealed, a careful process of heating and cooling that makes it sufficiently ductile so it can be stamped into shapes required for auto bodies.

Severstal, Johnson said, applied for a $730 million Department of Energy loan to build a continuous annealing line for high-volume auto production. But the loan was denied two years ago, he said.

Ron Krupitzer, vice president of automotive applications for the Steel Market Development Institute, disagrees with Johnson's assessment that the steel industry has been slow to invest in manufacturing capacity for high-strength steel.

"We have been growing the amount of advanced high-strength steel dramatically," Krupitzer said. He declined, though, to disclose the capacity figures of his members.

And of the seven companies that supply steel to the auto companies, only three, Krupitzer said, have a continuous annealing line that can produce steel that is competitive with aluminum in weight and strength.

He said more steel manufacturers are adding capacity to make high-strength steel and research continues to make steel stronger and lighter. Johnson said Severstal is adding more capacity to produce high-strength steel.

Rob Kopf, U.S. Steel's general manager of sales for North America flat roll steel, said his company is developing a next generation of advanced high-strength steel for automotive applications. "We're well down the path of getting these things from being research oriented to a steel mill production environment," he said.

U.S. Steel, Kopf said, doesn't view the F-150's move to aluminum as the steel industry blowing it. "I think it is overstated to say we lost it to aluminum. There is still a tremendous amount of steel in that vehicle."

Ford uses high-strength steel in the 2015's pickup's frame, which is about 60 to 70 pounds lighter than the frame on the 2014 F-150.

Kopf said steel is still the better value for both manufacturers and consumers when such things as the costs to convert assembly lines and manufacturing processes are considered. Consumers, he said, pay more for aluminum vehicles and more to have them repaired.

The steel institute's Krupitzer said: "We believe Ford chose to go to aluminum to differentiate itself in the market."

Ford spokesman Mike Levine said the company "evaluated many materials for the all-new Ford F-150 and determined that an advanced high-strength steel frame and a body consisting of high-strength, military grade aluminum alloys provided the best combination of durability and weight savings."

Ready in 2018

The aluminum vs. steel debate will no doubt continue to rage in coming years.

Krupitzer said steel retains a cost advantage of about 30 percent over aluminum. And he believes manufacturing aluminum bodies requires a much more complex and expensive manufacturing process. Ford's Dearborn F-150 plant will be offline for 11 weeks this summer as Ford installs new production equipment and retrains the work force.

Severstal's Johnson said: "Our focus right now is getting these [lightweight] materials on the market. If we can prevent others from switching over, we won't have to fight against some other incumbent material. We need to get this done before aluminum gets its foot too far in the door."

It's not inevitable, he said, that the five other full-sized pickups - the Chevrolet Silverado, GMC Sierra, Ram 1500, Toyota Tundra and Nissan Titan - will follow the

F-150 and trade steel for aluminum for their bodies.

Krupitzer said the next generation of lightweight steel should be ready for production around 2018 and will be able to compete against aluminum on weight and strength and beat it on price.

"There are an awful lot of aluminum panels in that F-150," he said, "and we are going to work hard to get them back."

You can reach Richard Truett at rtruett@crain.com.


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