We see a clear relationship between our Company's challenges and these global sustainability challenges. For example, consumers are increasingly concerned about high fuel prices, energy security and climate change. Global competition for resources makes us vulnerable to rising prices for some of the key commodities we use to make our vehicles, including steel and petroleum-based materials.
With these great challenges comes great opportunity. The companies that make the high-quality products and services that consumers really value – and do so in ways that limit harm to the environment and maximize benefits to society – will be preferred in the marketplace. And the companies that provide mobility solutions to the world's burgeoning mega-cities will tap into vital and growing markets.
Despite the difficult year for our Company, we have progressed in the three key areas we outlined in our previous report: integrating sustainability issues into our operations, driving technological innovation and undertaking external dialogue and partnerships.
Integrated strategy
In April, we created a new position: Senior Vice President, Sustainability, Environment and Safety Engineering, responsible for setting strategy, establishing goals and integrating sustainability across the Company. Our progress in these areas will be reviewed regularly at meetings of our most senior executives. In addition, we will continue to work as a team to build on existing examples of integration, which include the following.
Our North American product development function includes sustainability and vehicle safety as "innovation pillars," used to guide the development of future products. For example, our product planning explicitly considers long-term emissions reductions that represent our contribution toward climate stabilization.
Our procurement organization works with our suppliers to help them align their practices with our Code of Basic Working Conditions. During 2006, the Code was revised to include additional commitments on community engagement, corruption, the environment and sustainability. Our clear stance on human rights also helped us take swift and decisive action when an instance of slave labor was discovered in our supply chain.
Our manufacturing operations have integrated sustainability goals and indicators into their scorecards to drive progress. For example, we have cut global energy use by 27 percent and water use by more than 25 percent since 2000.
Technological innovation
As the pace of change accelerates, innovation is more important to our Company than ever.
Examples of Ford's innovations can be seen on the road today, including nearly 47,000 Ford Escape Hybrid and Mercury Mariner Hybrid vehicles. Globally, we have placed more than 5 million vehicles in service capable of running on renewably produced ethanol fuel. We are promoting the development of infrastructure in North America and Europe that will expand the use of these biofuels and help reduce our dependence on oil. We have built 4 million vehicles globally with electronic stability control systems. More than 1 million of those vehicles feature Ford's industry-exclusive AdvanceTrac® with Roll Stability Control™.
In the near future, you'll see more innovation. The 2008 Escape Hybrid will use seat upholstery made from 100 percent post-industrial material. New safety features will help drivers avoid collisions through technologies like lane departure warnings and assisted braking.
Looking further out, technologies in development include the Escape Hybrid E85 demonstration fleet, which combines hybrid technology with Flexifuel capability. This fleet joins test fleets of vehicles that run on hydrogen fuel cells and hydrogen internal-combustion engines.
And for a glimpse of what the future may hold, in early 2007 we demonstrated a driveable Ford Edge Plug-in Hybrid. This industry-first hybrid uses a plug-in lithium ion battery and a hydrogen fuel cell generator. The system, called HySeries Drive™, powers the vehicle 25 miles each day on about $1.00 of electricity from the grid before switching to the hydrogen fuel cell to extend the range. For a commuter traveling 50 miles per day this translates to more than 80 miles per gallon, zero emissions and a 70 percent reduction in fuel cost.
External dialogue and partnerships
Partnerships extend our own capabilities and our ability to innovate.
We have partnered with our customers to help them offset greenhouse gas emissions from their vehicles. In the United States, we do this in partnership with TerraPass; in the UK, Land Rover is working with Climate Care to offset the emissions from the first three years that customers own their 2007 vehicles.
We have numerous partnerships aimed at addressing climate change and energy security issues. Most recently, Ford joined the United States Climate Action Partnership (USCAP), an alliance of major businesses and leading climate and environmental groups that have come together to develop an economy-wide, market-driven approach to reduce greenhouse gas emissions. In addition, Ford is the only automotive member of the Chicago Climate Exchange, a voluntary initiative aimed at understanding the potential for carbon trading. We're working with the energy company BP to explore ways to reduce greenhouse gas emissions from fuels, increase energy security and seek alternatives to the current reliance on petroleum.
We're partnering with Northwestern University on nanotechnology approaches to structural materials that have the potential to improve vehicle fuel economy. And we are participating in the Prince of Wales International Business Leaders Forum to examine the influence of global poverty on our business and the roles we might play in alleviating it.
Looking ahead
The economic dimension of sustainability looms large for the Ford of 2007. We must return to profitability in order to continue to contribute to addressing global sustainability challenges.
In 2006, we lost $12.6 billion, largely due to restructuring costs, and took the painful but necessary actions of closing plants and significantly reducing our workforce. In this report, you will find a discussion of how we have tried to manage our downsizing in a responsible way. We are continuing to align our capacity with demand, accelerate the development of desirable new products and support our people through the transition so they can focus as a team on the challenges ahead. We also are continuing to implement the product actions needed so that our Company can contribute to climate stabilization.
In the coming year, you will see us moving to become more globally integrated and aligned to meet our goals. This approach will help us tackle both business and sustainability challenges, and provide a new generation of products with significantly less impact on the environment.
We continue to make dramatic improvements in vehicle quality. Our customers agree. In the 2007 J.D. Power Initial Quality Study, Ford Motor Company vehicles earned 14 vehicle honors, more than any other automaker.
We are firmly convinced that we will come through the current crisis leaner but stronger, more nimble and more able to seize on the many opportunities presented by the world's expanding need for sustainable mobility.
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President and CEO |
