INTERVIEW-Kaiser Aluminum sees benefit in new car rules

Thursday, May 21, 2009
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*Sees aluminum car content rising *Sees growth in auto industry NEW YORK, (Reuters) - Kaiser Aluminum expects to benefit as car makers scramble to install lighter, more efficient components in vehicles to conform with tougher emission regulations, the company's head said Wednesday. "This little sliver of business has the potential for significant growth for us," Kaiser Aluminum Chief Executive Officer Jack Hockema told Reuters, a day after President Obama ordered the auto industry to make more fuel-efficient cars to cut greenhouse gas emissions. Hockema said only 6 percent of Kaiser Aluminum's $1.5 billion annual revenue comes from the auto industry, compared with 48 percent from aerospace. But the amount of its aluminum used in vehicles -- for braking systems, bumpers and drive shafts -- is growing at a 5 percent compounded rate per year. He said on average there were 18 pounds of aluminum per vehicle in 2000 and that rose to 26.3 pounds in 2008. Aluminum has the strength of steel, but is much lighter. "It's significant and our projection is that it will grow more rapidly than that going forward," said Hockema. Under new standards, U.S. passenger vehicles and light trucks must average 35.5 miles per gallon by 2016. The current law, approved by the Bush administration, requires a similar gain by 2020. "A lot of automotive engineers were already beating down our doors looking for new alumimum applications to make their vehicles more fuel-efficient," Hockema said. "After yesterday's announcement they have even more incentive to do that. "We see this as a good growth market in terms of pounds per vehicle," he said, without putting a figure on the growth. Asked about the impact of General Motors and Chrysler cutting production for several weeks this year because of the economic downturn, Hockema was positive. "We don't like that they're only building 8 million vehicles this year. It was bad news in 1982 and '83 when the same thing happened, but all it did then was create pent-up demand." Since the industry accounted for only 6 percent of Kaiser's business, he said the auto shut-downs would not have a significant impact on the company's results. "We are confident people are going to want to buy the cars they should have bought this year and that's just going to get stacked up in the future and we're going to have more aluminum content. "I can't predict what the build rates will be, but I predict they will get back up ito the 17 million range and I think that curve of (aluminum) content is going to grow at a faster than 5 percent rate."

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