Ford's Q4 2017 results impacted by rising prices of aluminium and steel

Ford’s fourth-quarter 2017 results were out on Wednesday afternoon and report indicated that rising prices of aluminium is putting pressure on its profits.  Ford’s aluminium intensive vehicles use more aluminium than its rivals and the 20% rise in price in 2017 has impacted its earnings.

Aluminum closed at $2,229 per tonne on Tuesday. U.S. President Donald Trump administration’s plan to impose tariffs on imported aluminium and steel could push prices even higher. Ford gave a lower earnings estimate for 2017 and 2018 on higher prices for steel and aluminium and as well as currency volatility and said that it could cost the company $1.6 billion in 2018.

Ford Chief Financial Officer Bob Shanks told analysts at a conference in Detroit last week that rising steel and aluminium prices were now the main cause of higher costs for them.

"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 like General Motors Co and Fiat Chrysler Automobiles NV were however of the opinion that rising commodity costs are not much of an issue for them.

Volkswagen and a Jaguar Land Rover said they managed rise in raw material prices by cutting other costs and also by "working closely with our suppliers”.

“These are very profitable vehicles. But a spike in aluminium prices will eat into those profits," said Sam Fiorani, vice president of AutoForecast Solutions.

"The entire industry is facing rising commodity costs and I think Ford has just chosen to highlight it," said Michael Robinet, MD of automotive advisory services at IHS Markit.

Ford shook the auto industry in December 2014 by launching the current-generation all-aluminium F-150 pickup truck, shaving 700 pounds (318 kg) off its weight and boosting fuel economy. Ford's F-series trucks symbolize the largest-scale use of aluminium in a high-volume vehicle. F-Series pickup trucks, America's best-selling vehicle line for decades sold almost 900,000 units in the United States in 2017. Ford also uses a large amount of aluminium in some lower-volume SUV models.