Why Ford's New Deal Is a Big Deal

Ever heard of carbon fiber?

If not, you will. Carbon fiber, properly called "carbon-fiber reinforced polymer," is an exceptionally strong and exceptionally light building material. It's also exceptionally expensive, which is why it's mostly used in cost-no-object situations -- think exotic yachts, military aircraft, and high-end sports and racing cars like Ferraris -- along with the occasional fancy hockey stick or tennis racquet.

Finding a way to make carbon fiber more affordable has been a Holy Grail for several industries. It's especially important to the auto industry, where reducing vehicle weight without compromising safety has become a top priority.

So far, that challenge hasn't borne fruit, but a new deal between Ford (NYS: F) and Dow Chemical (NYS: DOW) aims to change that.

An urgent need to push technology's bounds
At Ford and the other global automakers, the big challenge keeping engineers working long hours is the urgent need to increase fuel economy. Strict new rules in the U.S. and other major automotive markets around the world are requiring unprecedented leaps in automotive fuel economy, on aggressive schedules.

There are a number of ways to reduce the amount of gasoline a given vehicle consumes, but one of the best is to reduce its weight. As long as it can be done without compromising passenger safety, reducing weight allows engineers to give customers the same-sized vehicles they're used to, with the same performance they expect, while using a smaller, less powerful, and less thirsty engine.

Even little reductions help, but the problem is that the improvements that can be made with existing materials without significantly increasing the cost of our cars and trucks have already been done. Toyota (NYS: TM) , General Motors (NYS: GM) , and others have, like Ford, aggressively sought to reduce the weight of their vehicles in recent years. And progress has been made, making good use of new high-strength steel alloys and other innovative materials.

But engineers working on the weight-reduction problem have looked longingly at carbon fiber, which offers the strength of steel body panels with much less weight. Mainstream automakers have been able to use it here and there -- GM's top-of-the-line Corvettes have some carbon fiber panels, as do Lexus sports cars made by Toyota -- but its cost has largely ruled it out for mass-market applications. That's why Tesla Motors (NAS: TSLA) will use aluminum panels on its upcoming mass-market Model S instead of the carbon fiber it had used on its much more expensive first car, the Roadster, and why popularly priced performance cars like Ford's Mustang and hybrids like the Prius don't make much use of the material.

But now, the push is on to change that.

Why carbon fiber is key to the electric-car revolution
Ford says its goal is to reduce the weight of its new vehicles by 250 to 750 pounds by 2020, partly by using lighter materials like carbon fiber. Given that a new Focus hatchback weighs about 2,900 pounds, even 250 pounds represents a significant reduction -- but an essential one, if fuel-economy standards are to be met without significant compromises in performance or utility.

The new deal between Ford and Dow Chemical's Automotive Systems division aims to help make that happen. It's a joint-development agreement that will see researchers from both companies focus on making carbon fiber affordable and high-volume mass production feasible -- a related but somewhat different challenge.

Ford says that reducing weight is especially important in its plug-in hybrid and electric applications, where reduced weight translates directly into increased range -- the biggest challenge facing electric-car makers.

If the new venture is successful, Ford says carbon fiber components could start appearing in its mainstream models before the end of the decade. While that will come with its own challenges -- body shops, for instance, will need to learn to work with the material -- it could give Ford a leg up in the tough battle to meet fuel-economy standards around the world.

Gas prices seem set to continue climbing for the foreseeable future. That will continue to force innovation at the automakers, but it also means that the future looks bright for the energy sector. If you're interested in investing in the best oil and gas companies, check out The Motley Fool's new special report, "The Only Energy Stock You'll Ever Need." It's completely free for Fool readers, but only for a limited time -- so get yours now.

At the time thisarticle was published Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at@jrosevear. The Motley Fool owns shares of Ford.Motley Fool newsletter serviceshave recommended buying shares of Tesla Motors, General Motors, and Ford and creating a synthetic long position in Ford. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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