Thursday, July 22, 2010

Why Car Makers Are Opting For Aluminium?

Aluminium Car
An engaging priority of car makers worldwide is to go on reducing vehicle weight so that fuel consumption is brought down. The goal is environment protection. One way to go about the task is to seek substitution of steel by lighter weight aluminium, which has also other qualities absent in the ferrous metal. The more expensive vehicles already have their bonnets made in aluminium.

But the auto industry must secure much greater weight reduction by using aluminium in car outer panels like doors constituting nearly 20 per cent of total body in weight. Engineers at sheet-making centres and auto plants have wondered for long if aluminium will prove to be good for making critical structural components like complete floor tunnel and reinforcements too. If this happens, then light weight car designing could be taken to an altogether new level.

Thanks to the path-breaking fusion technology developed by Atlanta-based Novelis, which our own aluminium to copper maker Hindalco acquired in 2007 and the unflinching quest for lightweighting by the luxury car maker Audi, its new A8 Sedan has turned out to be highly aluminium intensive. Audi is chasing a target of raising the strength of load bearing components by a quarter and in this Novelis technology provides the right foil.

In the use of aluminium auto sheet, BMW is now keeping Audi company. Novelis tells us that BMW 7 series is the “first mass production vehicle” to employ fusion technology for making a one piece door inner, including a window frame. Higher weight factor beside, steel will not lend itself to such complex structuring. Here we are talking about cars for the market top end. But the increasingly tough regulatory environment will make demand for lighter cars across the board burning less fuel. This no doubt will create ground for greater application of aluminium in building car body and components going beyond current projections.

This brings us to the fact that when someone bids for the likes of Novelis, he looks particularly closely at the capacity of the targeted enterprise to add value to the metal and its R&D prowess to innovate technologies. As this was a major consideration with Hindalco when it saw an excellent fit in Novelis for its own strength in producing alumina and aluminium at least cost, so also Lakshmi Mittal and Tata Steel must have been besotted by high class technology at the disposal of Arcelor and Corus.

At the same time mergers and acquisitions should ideally be left to brave hearts. Both Hindalco and Tata Steel in their rightful desire to get global footprints in aluminium and steel bought Novelis and Corus by paying premium prices when the market was at its zenith. Who then knew that the world would sink into a recession in 2008 the severity of which would stand in comparison with Great Depression beginning October 1929.

As economic activity in North America and Europe took a painful beating, Novelis had to suffer. Its loss of $1.9 billion during 2009 financial year stands as testimony to that. But an unruffled Kumar Mangalam Birla then said, “I remain very confident that inherent strengths of Novelis will see us through in the next two years. Our commitment to Novelis remains unflinching.” Last year saw world primary aluminium production falling to 37.67 million tonnes from 40.13 million tonnes and consumption to 34.31 million tonnes from 37.42 million tonnes. Construction industry and auto sector in the western world, the US in particular, proved to be the Achilles Heel for aluminium makers. Unarguably, the Hindalco-owned flat-rolled products maker would have fared worse in 2008-09 had it not been for the emerging world buying one-third of Novelis items.

The fact also remains high tech value added aluminium based products do not fare in the same way as commodity aluminium. Same is the case with any other metal. But the last recession, embers of which are still flying, was unsparing of any business.

Even then a host of management actions but more particularly, as Hindalco managing director Debu Bhattacharya told the Press, the unexpected strong sales in Asia and South America helped in bringing a turnaround in Novelis which earned profits of $405 in 2009-10. Incidentally, Novelis is South America’s leading rolled products maker. The winding down of an unfavourable can supply contract, a back-breaking legacy of the earlier management and also a plant closure aided turnaround.

Speaking at a recent aluminium conference at Oslo, Novelis president Philip Martens said growing use of the white metal in construction, electronics, autos, packaging and infrastructure would be the principal driver for rise in demand for rolled products. Sustainability concerns are also underpinning such demand growth. By annually recycling over 35 billion aluminium beverage cans, Novelis is playing a trailblazing role. The good thing about aluminium is that like copper it lends itself well to reuse over and over again. This translates into considerable saving of energy. With a reenergised Novelis under its belt, Hindalco has a place in the sun.

source: BS