Steelmaker fights for autos after Ford defects

LONDON • When Ford Motor Co. confirmed last year it would build its most popular pickup truck using aluminum, the automaker’s steel supplier was caught flat-footed.

Now Arcelor-Mittal, the top worldwide supplier of steel for autos, has built a two-pronged response to try to head off defections by other customers including General Motors, Fiat Chrysler and Japan’s biggest carmakers.

First, the Luxembourgbased company developed lighter steel that’s as strong as earlier products. Second, it embedded almost three dozen engineers with car companies around the world so there are fewer surprises on vehicle redesigns, according to Brian Aranha, head of ArcelorMittal’s automotive business.

“We see the threat,” said Aranha, whose unit is ArcelorMittal’s most profitable, in an interview at the company’s London offices. Losing the deal with Ford “was on a large-enough scale that it made us pay a lot of attention and adjust our approach.”

Aluminum weighs less than steel, reducing fuel consumption of cars amid stricter emissions limits. At the same time it has historically been tougher to weld than steel, and typically costs about 30-per-cent more. It was breakthroughs in welding that helped overcome some of those concerns, leading to Ford’s decision to build its F-150 truck with an aluminum body.

The move to aluminum was based on weight-reduction targets, said Matthew J. Zaluzec, head of materials and manufacturing research at Ford. “The engineering and research staff looked at many lightweight options, including aluminum, advanced highstrength steel, as well as other materials options,” he said.

The threat for ArcelorMittal, the world’s biggest steelmaker, is other carmakers will follow suit. Its automotive customers include GM, Daim- ler AG, Toyota and Honda.

The first step in meeting the new challenge was to take advantage of advanced engineering techniques to create lighter steel, including new hot-stamping processes and laser-welded blanks, according to ArcelorMittal. While the new products cost more, customers would use less, according to Aranha. That cuts the weight by about 20 per cent for roughly the same cost. The new products are already available for pickup trucks.

“You’ve seen Mittal inv es ting significantly more than their peers,” said Seth Rosenfeld, an analyst at Jefferies International Ltd. in London. “They have the size and financial flexibility to do that and they haven’t held back in that regard.”

Carmakers aren’ t automatically looking to move away from steel, according to Aranha. They switch because they don’t think they have a

It made us pay a lot of attention and adjust our approach

way of making their vehicles lighter with steel, he said. It’s the job of his unit to make sure customers are aware that steel is now available that works just as well.

The auto industry uses about 150 million tonnes of steel annually compared with 4.5 million tonnes of aluminum.

Many in the aluminum industry, meanwhile, are convinced the future is on their side. Norsk Hydro ASA, an aluminum maker whose customers include Audi AG, BMW and Daimler, is spending 130 million euros ($180 million) to expand capacity fourfold to an annual 200,000 tonnes from next year at its plant in Germany to meet demand from carmakers.

“The trend is clearly a shift toward aluminum,” said Svein Richard Brandtzaeg, Norsk Hydro’s CEO.

ANDREW TESTA / THE NEW YORK TIMES Brian Aranha, head of ArcelorMittal’s auto business, said losing the deal with Ford “made us pay a lot of attention.”