Elliott Management claims Arconic faced loss by sharing its aluminium patent for Ford-150

Elliott Management, which is now fighting for ownership of Arconic, alleges that Alcoa is paying a huge price for its contract to supply aluminium for Ford Motor Company’s F-150 pickup.

According to a petition filed by New York hedge fund Elliott Management, Ford asked Alcoa Inc. to share its patented aluminium bonding process for F-150 pickup with its competitors. As Alcoa agreed to share its patented process with its competitors, its closest rival Novelis gained a competitive edge in the business.

That is one of the pitches that Elliott is putting forward to push for management change at Aronic, the aluminium value added business that spun off from Alcoa in 2016. Elliott owns a 13.2% stake in Arconic is now trying to get more company representative on Board of Directors after making Arconic CEO Klaus Kleinfeld step down last month.

"Ford made Arconic share its innovations with Novelis," Elliott's report asserts. "Now Novelis is the No. 1 auto sheet supplier. Arconic did the work. Novelis got paid."

However, no representative from Ford, Novelis and Elliott made any comment on the dispute.

Alcoa 951 is Alcoa’s patented breakthrough coating process for aluminium that prevents corrosion and prepares an aluminium component to be bonded with adhesives and rivets, in order to design automotive aluminium parts for vehicles such as the F-150.  This technology has opened up more avenues for increased use of aluminium in the automotive sector.

According to a report in Automotive News, Alcoa spokesman Kevin Lowery revealed in 2013 that the company had agreed to share its technology "at the request of auto-makers," but did not name Ford.

Arconic spokeswoman confirmed that Alcoa did not give away its technology and the company got paid for its licensing deal. But Elliott alleges that Arconic lost market share due to this decision. To date, Novelis has not publicly confirmed that it used Alcoa 951 processing technology for its automotive aluminium.

Automotive aluminum sales in North America are growing and so is the demand for aluminium auto sheets and parts. Both the top suppliers from the North American automotive aluminium market, Arconic and Novelis, are ramping up their capacities and boosting sales. 

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"The global trend to lightweighting will continue," said David Hess, interim CEO, Arconic, "because it's a good deal for our end customers." He says 95 percent of the company's sheet aluminum production through 2018 is already covered by customer contracts.

The controversy on aluminium patent and Eliott’s repetitive attempt to get an edge on BoD in Arconic seem to have no concrete effect on the company’s sales volume and market shares.