Aluminum Sheet Outlook in Auto
Randall Scheps
Alcoa
1
1.14.2014
Cautionary Statement
2
Cautionary Statement
2
Forward-Looking Statements
This presentation contains statements that relate to future events and expectations and as such constitute forward-looking statements. Forward-looking
statements include those containing such words as “anticipates,” “estimates,” “expects,” “forecasts,” “outlook,” “plans,” “projects,” “should,” “targets,”
“will,” or other words of similar meaning. All statements that reflect Alcoa’s expectations, assumptions, or projections about the future other than
statements of historical fact are forward-looking statements, including, without limitation, forecasts concerning global demand growth for aluminum, end-
market conditions, global auto body sheet consumption, and growth opportunities for aluminum in automotive, commercial transportation and other
applications, trend projections, targeted financial results or operating performance, and statements about Alcoa’s strategies, outlook, and business and
financial prospects. Forward-looking statements are subject to a number of known and unknown risks, uncertainties, and other factors and are not
guarantees of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements
include: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal
Exchange-based prices (and premiums, as applicable) for primary aluminum, alumina, and other products, and fluctuations in indexed-based and spot
prices for alumina; (b) deterioration in global economic and financial market conditions generally; (c) unfavorable changes in the markets served by
Alcoa, including automotive and commercial transportation, aerospace, building and construction, distribution, packaging, defense, and industrial gas
turbine; (d) unfavorable changes in aluminum recycling rates or Alcoa’s recycling capabilities; (e) the impact of changes in foreign currency exchange
rates on costs and results; (f) increases in energy costs or in the costs of other raw materials, or the interruption of energy supplies; (g) Alcoa’s inability
to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of
competitiveness and operations (including moving its alumina refining and aluminum smelting businesses down on the industry cost curves and
increasing revenues in its Global Rolled Products and Engineered Products and Solutions segments) anticipated from its restructuring programs and
productivity improvement, cash sustainability, and other initiatives; (h) Alcoa's inability to realize expected benefits, in each case as planned and by
targeted completion dates, from sales of non-core assets, or from newly constructed, expanded, or acquired facilities, such as the auto expansions in
Davenport, IA and Alcoa, TN, or from international joint ventures, including the joint venture in Saudi Arabia; (i) political, economic, and regulatory risks
in the countries in which Alcoa operates or sells products, including unfavorable changes in laws and governmental policies, civil unrest, or other events
beyond Alcoa’s control; (j) the outcome of contingencies, including legal proceedings, government investigations, and environmental remediation; (k) the
business or financial condition of key customers, suppliers, and business partners; (l) adverse changes in tax rates or benefits; (m) adverse changes in
discount rates or investment returns on pension assets; (n) the impact of cyber attacks and potential information technology or data security breaches;
and (o) the other risk factors summarized in Alcoa's Form 10-K for the year ended December 31, 2012 and other reports filed with the Securities and
Exchange Commission.
Alcoa disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or
otherwise, except as required by applicable law. Any forecast or other forward-looking statement set forth in the following slides speaks as
of the date such forecast or statement was originally presented as indicated on the slide. Alcoa is not updating or affirming any of such
information as of today’s date. The provision of this information shall not create any implication that the information has not changed since
it was originally presented.
May 2013
Source: Detroit News, May 2013
Historic auto industry shift to lightweight vehicles
Consumers/OEMs preferences, projected aluminum content per vehicle
Increasing sheet intensity
North America aluminum body sheet
content per vehicle (in lbs)
136
55
14
2015 2025 2012
Actual
Projected
~10x
~4x
Al auto sheet
demand
expected to grow
to 1MMT by 2025
Consumers want fuel economy
OEMs need fuel economy
54.535.5
27.2
2025 2011 2016
US CAFE regulations (MPG)
+100%
And 88% say fuel
economy will be
an important
factor in their next
vehicle purchase
% supporting higher fuel economy regulations
4 Sources: Alcoa Earnings Presentation, Jan 9, 2014
8566
2013 2010
Aluminum’s march through the car continues
0
100
200
300
400
500
600
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Engines
Wheels
BODY-IN- WHITE
Hoods
Source: Ducker Worldwide 2011
Heat
Exchangers
550 lbs
343 lbs
Pounds Per
Vehicle
Total aluminum content history and forecast, Lbs / veh
Based on our current understanding, we
believe we’re approaching the practical limits
of the application of high-strength steels…” –Frank Paluch, Senior Vice President,Honda R&D Americas
Aluminum intensity is growing and driving auto sheet demand
North American Market Demand (kMT)
Sources: Ducker Worldwide , IHS , Alcoa analysis *) Extrapolated based on IHS 2020 forecast 6
2,300
2,720
3,425
3,150
430
2012
2,400
2025*
4,550
1,125
2015
100
Other Auto Aluminum
(Castings, etc.)
Auto Sheet
4x increase in
auto sheet already
locked into designs
of 2015 models
$275M investment
Enables flexible production
Much of volume secured
Broke ground in Aug. 2013
Complete by mid-2015
Alcoa’s auto triple play: 3 smart investments to capitalize on AIV growth
$300M investment
Supported by secured contracts
On time and on budget
First coil by Dec. 2013
7
Davenport
Phase 1 Auto Expansion
Auto Treatment Line – Davenport, IA
Saudi Arabia JV
Automotive growth projects
$380M total investment*
Addition to can sheet mill
Cold mill, heat treat, finishing
Broke ground in Dec. 2012
First auto coil by Dec. 2014
Positioning for growth in MENA
Tennessee
Phase 2 Auto Expansion
Alcoa TN facility– Alcoa, TN Saudi Arabia JV – KSA
Source: November 7, 2013 Investor Day
*Total investment relates to rolling mill capability expansion to include auto sheet, building and construction sheet
and foil stock. Alcoa’s investment portion is ~$95M
Tesla Model S • World Car of the Year
Award Winner
• Automobile Magazine’s
Car of the Year
• 5 Star Safety Rated
Range Rover • World’s First All-
Aluminum SUV
• 39% lighter body
Aluminum Bodies Already on the Road
Corvette Stingray • Aluminum Frame 100lbs
lighter than prior
• 57% stiffer
Next Step…
Mass Market
• 647,000 units sold (2013)
• New design launching this
year
• All new military grade
aluminum body
• 700 lbs lighter
• No compromises
The Biggest News for Aluminum in Decades
Video
2015 Ford F-150
“Over time, aluminum absolutely will
move across our product line. It will be
the material of choice.” – Alan Mulally
•Aluminum intensive body SUV
•No compromises: size, function safety,
performance
•28% (1050 lbs) total mass reduction vs. steel
•Aluminum body, doors, hood, chassis,
suspension, brakes
• 4.8 MPG fuel economy improvement
The typical car of the (near) future
All aluminum body in white
Based on our current understanding, we believe
we’re approaching the practical limits of the
application of high-strength steels…”
–Frank Paluch, Senior Vice President,Honda R&D Americas
A Major Shift in Material Mix Underway
Steel 59%
Aluminum 9%
Mg 0%
Iron 8%
Plastics 9%
Glass 3%
All Other 12%
Today’s SUV
Steel 30%
Aluminum 37%
Mg 4%
Iron 4%
Plastics 10%
Glass 3%
All Other 12%
Tomorrow’s SUV
Total Mass: 1,711Kg
28% Mass
Reduction Total Mass: 1,237 Kg
Source: ATG AIV
• Ample primary metal supply
• Hot and cold rolling can capacity flex to
auto
• Heat treat and finishing capacity is
unique to auto must be added
• Existing suppliers investing heavily
• Early involvement of supply base is
critical
• Experienced suppliers in best position
Supply Considerations
Typical heat treat and finishing line
Alcoa technology leading the way
Shift to aluminum sheet is accelerating 1MMT by 2025 (NA)
Aluminum saves more weight than steel up to 28%
Lower lifecycle CO2 17% Lower
Better fuel economy 4.8 MPG
No compromises for the end customer
Summary
When we put it all together, to have the F-150 do what
we wanted, there was only one answer: ALUMINUM -Raj Nair, Ford VP Global Product Development