A Meandering Route to a Greener Future

How do you make a 4,685-pound truck use 25 percent less fuel? By making it a 3,985-pound truck – at least according to Ford (F).

The automaker has said that, in an effort to improve fuel efficiency, it is considering using aluminum instead of steel for key parts of its signature F-150 truck line, trimming around 700 pounds from the vehicles’ weight. The proposal is part of the scramble among automakers to meet stringent new federal fuel efficiency standards, which will be phased in starting in 2017. By 2025, the standards will require automakers to double efficiency.

The standards were controversial when President Obama announced them last year. In the end, however, the president managed to get 13 major automakers to back the proposal in principle, though the carmakers have still pushed for significant changes in the way the proposal will be implemented.

Obama’s standards require only that new car models use less gas; they don’t say how. They don’t require that new models contribute to lower oil consumption overall or that they be any better for the environment. The Ford F-150 redesign may not do either of those things.

While aluminum parts help to reduce a car’s fuel consumption and emissions, aluminum production generates around 10 times as much carbon dioxide as steel production, according to a 1999 MIT report. The report found that, once production of raw materials is factored in, aluminum-bodied cars actually produce higher emissions than lightweight steel ones. Each aluminum-based car would need to be on the road for 32 to 38 years in order for the lower emissions of the final vehicle to offset the difference in emissions during production, according to the report.

Assembling aluminum cars is also more energy-intensive, since aluminum, unlike steel, is not magnetic. Automakers must use huge, electricity-hogging vacuums to move aluminum parts, while steel parts can be easily picked up with magnets.

The aluminum industry claims that the metal’s possible sustainability failings are made up for by its recyclability. Two-thirds of the aluminum ever produced remains in use today, according to the Aluminum Association, an industry group whose mission statement is to “aggressively promote aluminum as the most sustainable and recyclable automotive, packaging and construction material in today’s market.”

There are, however, only so many soda cans out there to be crushed down and turned into car parts. While the Aluminum Association trumpets the fact that 1.56 billion pounds of used beverage cans were recycled in 2008, the transportation industry consumed over 6 billion pounds of aluminum that same year. A further increase in demand could make recycled aluminum a much smaller portion of overall consumption. Novelis, the world leader in rolled sheet aluminum, is already tripling its U.S. production of the sort of aluminum used by the automotive industry.

An increase in demand could also spur a spike in prices. Recently, aluminum prices have been at two-year lows because of a supply glut. Ford’s proposed use of aluminum in its F-Series trucks could go a long way toward changing that. At one time, Ford F-series truck sales accounted for 5.5 percent of all U.S. vehicle sales; while sales have declined since then, the company still sold nearly 600,000 of the vehicles last year.

If aluminum prices do increase, beverage packagers may rely more on plastic – which, of course, is made from petroleum. Less oil would go into cars, but more would go into holding Coke and Pepsi. Fewer aluminum cans being produced would also mean fewer coming back to be recycled.

I don’t know what net effect Ford’s move to aluminum would have on the environment. The administration was equally in the dark when it pushed the new fuel standards without knowing how automakers would achieve them. The new standards may end up being a good thing. They may not. Only time will tell.

About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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