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Rising aluminum costs cut into Ford's profit

When Ford reports fourth-quarter results on Wednesday afternoon, it is expected to fret that rising metals costs have cut into profits, even as rivals say they have the problem under control. Aluminum prices have risen 20 percent in the last year and nearly 11 percent since Dec. 11. Steel prices have risen just over 9 percent in the last year. Ford uses more aluminum in its vehicles than its rivals. Aluminum is lighter but far more expensive than steel, closing at $2,229 per tonne on Tuesday. U.S. steel futures closed at $677 per ton (0.91 metric tonnes). Republican U.S. President Donald Trump's administration is weighing whether to impose tariffs on imported steel and aluminum, which could push prices even higher. Ford gave a disappointing earnings estimate for 2017 and 2018 last week, saying the higher costs for steel, aluminum and other metals, as well as currency volatility, could cost the company $1.6 billion in 2018. Ford shares took a dive after the announcement. Ford Chief Financial Officer Bob Shanks told analysts at a conference in Detroit last week that while the company benefited from low commodity prices in 2016, rising steel prices were now the main cause of higher costs, followed by aluminum. Shanks said the automaker at times relies on foreign currencies as a "natural hedge" for some commodities but those are now going in the opposite direction, so they are not working. A Ford spokesman added that the automaker also uses a mix of contracts, hedges and indexed buying. Industry analysts point to the spike in aluminum versus steel prices as a plausible reason for Ford's problems, especially since it uses far more of the expensive metal than other major automakers. "When you look at Ford in the context of the other automakers, aluminum drives a lot of their volume and I think that is the cause" of their rising costs, said Jeff Schuster, senior vice president of forecasting at auto consultancy LMC Automotive. Other major automakers say rising commodity costs are not much of a problem. At last week's Detroit auto show, Fiat Chrysler Automobiles NV's Chief Executive Officer Sergio Marchionne reiterated its earnings guidance for 2018 and held forth on a number of topics, but did not mention metals prices. General Motors Co gave a well-received profit outlook last week and did not mention the subject. "We view changes in raw material costs as something that is manageable," a GM spokesman said in an email.

Jaguar opens new engine plant in the UK

The heads of Jaguar Land Rover are having a busy couple of weeks opening factories. Just days after inaugurating the company's first overseas plant in China, the automaker's new Engine Manufacturing Center in the UK is being inaugurated, as well. The plant near Wolverhampton, England, marks the first time in decades that JLR is building its own powerplants in-house. Further signaling the importance of this launch for the business, Queen Elizabeth II and Prince Philip were on hand and even tweeted about it.
The factory's first major project is to build JLR's latest Ingenium four-cylinders, starting with the 2.0-liter diesel version. "Our new Engine Manufacturing Centre is an important step in advancing the competitiveness and capability of the UK automotive sector. The production of in-house engines will support the expansion of the UK supply chain providing critical mass for inward investment," said Trevor Leeks, plant operations director in the automaker's announcement.
Opening the doors to the Engine Manufacturing Center has been years in the making for JLR. The plant was first announced in September 2011 and broke ground in June 2012. Building it cost the company 500 million pounds ($800 million) and created 1,400 new jobs. Of course, being a state-of-the-art factory, considerations were made to make the place as energy efficient as possible. That meant installing the UK's largest solar array with 21,000 panels to produce about 30 percent of the site's electricity needs.

Automotive Grade Linux will be the backbone of your connected car

Creating a backend for a secure, reliable, and expandable infotainment system is costly and time consuming. The Linux Foundation, a non-profit organization, has set out to promote and advance the Linux operating system in commercial products. Automotive Grade Linux, or AGL, is a group within the Foundation that seeks to apply a Linux backend to a number of automotive applications in a variety of vehicles from various suppliers and manufacturers. AGL's goal is to create a common, unifying framework that allows developers and manufacturers to easily implement applications across platforms. Currently, the focus is on infotainment systems, but AGL has plans for instrument clusters, heads-up displays, and eventually active safety software. At CES, a display from Panasonic showed a completely digital and customizable dashboard that allows information and apps to be moved from the gauge cluster to the infotainment screen and back, all through the use of gesture and touch controls. Although the organization has been around for five years, it's really only been in the past three that the group has been working hand in hand with automakers and suppliers. The first two OEMs to participate, Toyota and Jaguar Land Rover, have since been joined by Mazda, Suzuki, Ford, and, as of this week, Daimler. The latter is important as until now most of AGL's partner's have been based in Japan or the US. Other partners include suppliers Denso, Renesas, Continental, Qualcomm, and Intel. AGL want's to supply roughly 80 percent of the backend, allowing partners to then finish and refine the Linux system for each individual application. Think of how the Android operating system is refined and customized for individual smartphones from Samsung, LG, and Motorola. While the final product looks different, developers can have an application that will work across all AGL systems. Because it is open source, anyone can use and develop for AGL. You can even go onto the group's website and download a copy right now. There is also a software development kit available that helps facilitate app creation on the platform. Vehicle development cycles take roughly five years, so there currently are no cars that run an AGL backbone available for consumers. AGL Executive Director Dan Cauchy says products should be hitting the market later this year, with even more coming in 2018. Right now, the industry is relatively fragmented when it comes to infotainment and related systems.