Ford supplier's boardroom drama zeros in on aluminum patent


Kleinfeld: Pressured to step down

When Ford Motor Co. selected Alcoa’s aluminum for the F-150 pickup, that contract got here at an enormous value for the provider, says certainly one of its house owners, who’s now battling for management of the corporate.

In accordance with a doc printed April 11 by the New York hedge fund Elliott Administration, Ford requested Alcoa Inc. to share with rivals its patented aluminum bonding course of — dubbed Alcoa 951.

Alcoa’s settlement to take action enabled rival aluminum provider Novelis to realize a aggressive edge in the enterprise, Elliott’s essential evaluation fees.

That is without doubt one of the beefs behind Elliott’s push for administration change at Aronic Inc., the aluminum elements enterprise that spun off from Alcoa final 12 months. Elliott, which owns a 13.2 % stake in Arconic, final month succeeded in pressuring Arconic CEO Klaus Kleinfeld to step down, and is attempting to realize extra illustration on Arconic’s board of administrators. Final week, Arconic’s board of administrators issued a letter to shareholders urging them to withstand what it referred to as “Elliott’s questionable ways.”

“Ford made Arconic share its improvements with Novelis,” Elliott’s report asserts. “Now Novelis is the No. 1 auto sheet provider. Arconic did the work. Novelis received paid.”

A Ford spokeswoman declined to debate the dispute. Novelis and Elliott couldn’t be reached for remark.

Alcoa 951 is a patented coating course of that forestalls corrosion and prepares an aluminum element to be bonded with adhesives and rivets. That enables automakers to design aluminum structural elements for automobiles such because the F-150.

That technological innovation is a linchpin in the auto business’s transfer towards higher use of aluminum.

Aluminum hoods, decklids and door panels turned frequent in latest years as automakers tried to scale back automobile weight. However to rework the physique of the F-150 into aluminum, Ford wanted a breakthrough for becoming a member of the elements.

Whereas conventional metal our bodies are constructed with easy welds, aluminum elements are powerful to weld as a result of oxides on the floor of the steel can hinder a robust bond. Alcoa 951, utilized by spray or dipping, is unaffected by welding or stamping.

In 2013, Alcoa spokesman Kevin Lowery informed Automotive Information that the corporate had agreed to share its know-how “on the request of auto-makers,” however didn’t title Ford. Lowery additionally confirmed that Alcoa had licensed its coating to Chemetall, a German provider of chemical remedies for metals and plastics.

Alcoa didn’t give away its know-how, notes Arconic spokeswoman Lori Lecker. Alcoa received paid for its licensing deal. However Elliott maintains that administration allowed market share to slide away because of this.

Novelis mentioned in 2013 that it was growing its personal coating, however it acknowledged that it may use the Alcoa remedy. Up to now, Novelis has not publicly confirmed that it makes use of Alcoa 951.

The boardroom drama is taking part in out towards escalating competitors between the suppliers that dominate the North American automotive aluminum market, Arconic and Novelis.

Automotive aluminum gross sales in North America are booming. Within the first quarter, Arconic’s automotive aluminum gross sales jumped 43 % from a 12 months earlier, and the corporate expects gross sales in this section of $1.three billion, up sixfold from 2013.

For its half, Novelis expects to double its North American aluminum manufacturing in 2018, in contrast with 2014 ranges.

In the meantime, different rivals — similar to Aleris Worldwide Inc. of Ohio, Constellium of the Netherlands and UACJ Corp. of Japan — are piling into North America’s automotive market.

The businesses are eyeing the auto business’s plans to scale back automobile weight. By 2025, the typical North American automobile will use 500 kilos of aluminum, up from 423 kilos in 2014, based on analysis agency Ducker Worldwide.

Throughout Arconic’s quarterly earnings name with analysts, David Hess, who was named interim CEO upon Kleinfeld’s exit, mentioned that 95 % of the corporate’s sheet aluminum manufacturing via 2018 is roofed by buyer contracts.

“The worldwide pattern to lightweighting will proceed,” Hess mentioned, “as a result of it is a whole lot for our finish clients.”

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