Hints of aluminum body Jeep Wrangler good news for Alcoa

With Chrysler's CEO indicating the company may be looking aluminum to shed weight from its Jeep Wrangler, analysts say its good news for Alcoa Inc.

Speaking to reporters after an event, Fiat Chrysler CEO Sergio Marchionne told Automotive News Chrysler is watching the rollout of Ford's aluminum-bodied F-15 closely, but believes the company's Wrangler is its best potential case for aluminum.

"We continue to believe that the automotive industry is moving down an aluminum adoption curve beyond current expectations," Sterne Agee analyst Josh Sullivan wrote in a report issued Monday. "The large F-150 broke the ice; however economies of scale will make smaller vehicles (Wrangler) more valuable over time."

This would mark the first indication of aluminum body sheet adoption moving out of the truck and luxury escorts and into the value-priced higher-volume markets.

Sullivan writes that because large, heavy trucks and luxury autos have price points that can more easily capture the value lightweight aluminum offers, there has been investor consternation over whether or not aluminum could be competitive in smaller vehicle markets.

Sullivan and Sterne Agee Analysts Peter Arment and Asher Carey said they believe industry estimates for about 1.2 million tons of automotive aluminum sheet usage by 2025 is conservative, as well as Alcoa's (NYSE: AA) $1.3 billion revenue assumption for 2018.

Alcoa has not disclosed specifically which automakers it is working with, but it has been investing heavily in its flat-rolled automotive segments to meet growing demand.

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