Ford Taurus aluminum body cost analysis

Joel Clark's student's doctoral thesis (early 1990s, later Harvard Business School assistant professor): $500 steel unibody vs $1,000 aluminum unibody, before fabrication. Tom's critique: the thesis ignored that aluminum can't be resistance spot welded like steel.

First of all, do you know how long it takes to design a new automobile? The new car that comes out tomorrow, they started designing it three to five years before. It takes two years to buy the dies and have them machined for the stamping of the sheet metal. I used to tell people, anyone could build a $40,000 Audi — because that's what they cost back twenty years ago, now they're $80,000 or $100,000 — anybody could build a $40,000 vehicle out of aluminum. We built an all-aluminum Duesenberg in the 1930s. But no one's going to build a half-million-vehicle-per-year Taurus, which was sort of the Toyota Camry of 1990 — the largest selling vehicle in the country back then. Joel Clark had a student who went on to become an assistant professor at Harvard Business School. Her doctoral thesis was to compare the cost of an all-aluminum body-in-white with an all-steel body-in-white. A body-in-white is just the metal structure without any paint, without anything else on it, just the metal unibody construction. In early 1990s dollars, the cost of a Ford Taurus was $15,000 to $20,000. Guess what the cost of the steel unibody frame was? $500. The all-aluminum was about $1,000.

Tom recounts his disagreement with Professor (Joel) Clark's student's thesis, which concluded an aluminum Taurus would cost only $500 more. Tom challenged the analysis on fabricability grounds; the student rewrote a page but, in Tom's telling, missed the point.

Yes, you can buy an all-aluminum Audi. We had all-aluminum Duesenbergs in the 1930s. But you wouldn't buy a Ford Taurus for twenty thousand dollars if it was made out of aluminum. It would be a forty-thousand-dollar Ford Taurus. Professor Clark had students doing doctoral theses on substitution of aluminum, making a Ford Taurus out of aluminum, and concluded it would only cost five hundred more. I said, what about fabricability? She had to go back and rewrite a page in her thesis. And she still didn't get the point. There are reasons why cars and ships and railroads are made out of steel and airplanes are made out of aluminum. We'll go through that in a little bit.

Quick numeric anchor — "$25,000 car, $500 of steel" — to make the 5%-material-cost point. Engine and seats called out as the two most expensive subsystems.

So health costs are getting to be a substantial fraction. But the basic steel structure of a Ford Taurus, a $25,000 car — if you calculate the cost of the steel, it's about $500. Now there's other things go into a car, aside from the engine, which is the most expensive part of the car. What's the number two most expensive thing? The seats. People like seats, they like them to be comfortable.