Parked at the curb, the gleaming silver Audi A8 looks much like other luxury sedans. Walk up and give it a knock. Feels solid. Close the door, and it thumps with Mercedes-like authority. But beneath the buffed finish is a revolution in automobile construction. You won't find a steel structure, the mainstay of car design for the past 90 years. Instead, there's a space-age tubular web of aluminum.

This sleek Audi represents a bold gamble by Aluminum Co. of America to restore some luster--both to aluminum and its own sagging returns. The metal's price has tumbled 40% over the past five years, and CEO Paul H. O'Neill is on a mission to persuade auto makers worldwide of the benefits of lightweight, fuel-efficient aluminum cars. And he's attracting some interest. In addition to Audi, Alcoa has a project with Chrysler Corp. to develop the Prowler, a limited-production aluminum hot rod. Alcoa says it has projects under way with other carmakers, but it won't disclose details.

Twenty years ago, Alcoa helped expand aluminum's market by leading the industry's grab of the beverage-can market from Big Steel. But it's not certain that this latest bid will be as successful. The steel industry is already producing ever lighter gauges of steel. And then there's aluminum's cost--three times that of steel. The aluminum Audi, made largely by hand, sells for $46,550. But Audi, without disclosing figures, admits that's below its costs. Even though Alcoa is looking for a technology that would bring the cost of aluminum cars in line with that of steel ones, O'Neill says, "we may have to promise it before we know how to do it."

O'Neill, 58, who joined Alcoa as CEO in 1987 after serving as president of International Paper Co., is making those promises, since he needs new customers. Russian aluminum producers have been flooding the market for the past three years to raise hard currency and offset the loss of defense contracts at home. The result: Aluminum prices sank to record lows in 1993. Excluding accounting changes, Aloca's net income plunged 79%, to $4.8 million, in 1993, as its sales fell 5%, to $9 billion.

In the spring, major aluminum-producing nations, including Russia, drew up an OPEC-style accord to limit production. That has helped push prices up 20% this year. Analyst Thomas M. Van Leeuwen of CS First Boston estimates that Alcoa's profits--which fluctuate wildly with aluminum prices--could rebound to $132 million this year as revenues rise 7%, to $9.7 billion. Even so, the aluminum market is notoriously cyclical, and prices could decline again.

BILLIONS INVESTED. By then, O'Neill hopes to have Alcoa entrenched in the auto business. Aluminum's biggest allies in this fight are Washington regulators. When mileage standards were imposed in the 1970s, auto makers looked to aluminum parts, which weigh 40% less than steel ones, to lighten cars. Today, the average aluminum content is 200 pounds per vehicle, vs. 50 pounds in the 1960s.

Still, cars account for just 10% of Alcoa's business, while aluminum cans produce 22%. And Alcoa will have a tough time persuading car companies to go on an all-aluminum diet: They have billions invested in equipment that manufactures cars and light trucks by bending and welding steel. They would need to replace it with equipment to form and bond aluminum--machinery that hasn't been invented yet for high-volume production. And switching is expensive. For each pound they save by substituting aluminum for steel, auto makers spend $1.50 in added raw materials and manufacturing costs, according to a recent Massachusetts Institute of Technology study. Small wonder auto makers aren't ecstatic over aluminum. "They come kicking and screaming to the aluminum industry," acknowledges L. Patrick Hassey, president of Alcoa's Aerospace & Commercial Rolled Products Div.

But they do come, if just to be ready in case of another energy crisis or tougher mileage standards. Ford Motor Co., for one, is testing 40 experimental aluminum Sables it built with Alcan Aluminum Ltd. Honda Motor Co. came out with the sporty aluminum NSX, which it developed with Kobe Steel Ltd.

Alcoa's push to develop aluminum cars has been far more aggressive. In 1991, it got Audi to participate in an aluminum car project by offering to build a $70 million factory in the German town of Soest. The result: The A8, which went on sale in June, weighs 310 pounds less than comparable cars and gets 10% to 15% better mileage. Still, Alcoa engineers are struggling with production methods to lower costs. Meanwhile, Alcoa and Chrysler are in the middle of developing the Prowler. The No.3 auto maker has already built some prototype aluminum Neons. But concerned about cost, it has not decided whether to produce the Prowler, an entirely new model.

RIVETS REQUIRED. Aluminum cars may never roll off assembly lines until ways are found to build them as cheaply as steel cars. At the Alcoa plant in Germany, workers use castings and extrusions--pieces of aluminum pushed like Play-Doh through variously shaped holes--to brace the aluminum skin. That makes the structure as strong as steel. Still, aluminum doesn't weld easily, so parts have to be riveted and glued together. To cut costs, Alcoa is working on reducing the number of stamped parts used in cars from 250 per vehicle to 100. Alcoa hopes this will help it perfect a manufacturing process to produce niche lines of aluminum cars as cheaply as steel ones in three years. Alcoa expects to be selling $1 billion worth of aluminum bodies within 10 years. Today, its frame sales total $50 million.

Even if it solves its technological puzzles, Alcoa faces a livelier steel industry than the sluggish giant it defeated in the can war. Steel companies are already designing low-weight steel vehicles for the Big Three. "We think we can match [aluminum's] weight savings at a cost reduction," says Peter Peterson, marketing strategies and product applications director at U.S. Steel. "Shame on us if we should drop the ball."

O'Neill says he understands the challenges--and he's not about to stake Alcoa's survival solely on cars. That's why he's slashing costs at home while trying to find new markets in fast-growing Asian economies. Still, if Alcoa's big bet on aluminum cars doesn't pay off, O'Neill may have to get used to seeing his profits turn light as a feather whenever aluminum weighs heavily on the market.

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