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Automotive ramp-up comes with risks: Novelis

Keywords: Tags  Novelis, aluminum, automotive, Ford Motor, F-150, Jaguar Land Rover, Philip Martens, SAP China


NEW YORK — As demand for automotive aluminum continues to climb, issues tied to supply chain management, capacity restrictions and preparation for future conversions to aluminum will continue to present major challenges for global aluminum producers, according to Novelis Inc.’s top executive.

The myriad of ramp-up initiatives associated with meeting demand for automotive sheet—from software upgrades to plant retooling—come with very significant start-up costs, president and chief executive officer Philip Martens told AMM in an exclusive interview.

"Not every company can do this," he said. "You have to have scale and you have to have the ability to put your balance sheet at play and you have to have the ability to carry this operational cost, the people cost and the start-up cost for a couple of years before it all starts."

Atlanta-based Novelis is revamping several global manufacturing assets in preparation for the upcoming production cycle for Ford Motor Co.’s F-150 pickup truck and other vehicles featuring increased aluminum, including Jaguar Land Rover Ltd.’s XE sedan (amm.com, Aug. 1).

Dearborn, Mich.-based Ford, which is converting several Midwest stamping facilities, has issued a commissioning schedule that extends through the fall. "We’re ready to support them on an accelerated ramp-up schedule, if they want. But we are very comfortable with what they have supplied us with so far," Martens said, noting that Ford is involved in a series of "pre-production runs" for the F-150 designed to test every aspect of the manufacturing cycle. The automaker is expected to begin full production in mid- to late September.

"We have to make sure that all aspects of our operations are ready—not just the finishing lines," Martens said. "We completely retooled and upgraded our hot mill; we’ve upgraded our pusher furnace capacity and our remelt capacity; we’ve really looked at which cold mills we are going to use and which outside tolling partners we are going to have in place and which ones we are not, and how we are actually going to manage the sequencing of all of that into the lines that produce the automotive coil."

The infrastructure projects have been added as a result of existing requirements with auto manufacturers, Martens said, noting that any additional capacity has already been set aside for current customers.

"Everything that we have put in the ground is effectively sold out," Martens said. "Our facility that we are launching with Ford is sold; the third line we are launching in Oswego (N.Y.) is sold. We are pretty much sold out at the facility (that) we have in China and we actually are trying to moderate the customer profile in that plant. Sure, we have been approached by new clients and, yes, we are interested in expanding further, but these things take time."

To meet the pressures of added demand, Novelis has taken significant steps to properly manage its enterprise resource planning infrastructure. "We converted, and are converting, all of our auto plants to an SAP SE (software) system so we have good end-to-end visibility," he said.

"A lot of people underestimate the supply chain and logistical issues and the challenges there," Martens added. "Lead times are short and there is an expectation that you are going to have the inventory on hand. It really requires us to run systems in a very sequenced and disciplined manner."


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