Operational Energy Use and Greenhouse Gas Emissions

Operational energy use and greenhouse gas emissions are inextricably linked. The majority of our facilities' energy comes from fossil fuel sources, hence operational energy use is an important source of our companywide GHG emissions. Our efforts to reduce energy use and increase the use of renewable energy are also part of our strategy to reduce our GHG emissions and overall climate impacts. (See the Climate Change section for a discussion of our climate change strategy and product goals.)

We have been a leader in facilities-related GHG and energy-use reductions, public reporting of our GHG emissions, and participation in GHG reduction and trading programs.

• In 2008, we were the first automaker to join The Climate Registry (TCR), a voluntary carbon disclosure project that links several state-sponsored GHG emissions-reporting efforts, including the California Climate Action Registry and the Eastern Climate Registry. As TCR members, we must demonstrate environmental stewardship by voluntarily committing to measure, independently verify and publicly report GHG emissions on an annual basis using TCR's General Reporting Protocol.
• We were the first automaker to participate in GHG reporting initiatives in China, Australia, the Philippines and Mexico. In late 2007, Ford of Mexico was recognized by the Mexican government for four consecutive years of participation in that country's voluntary GHG reporting program. Ford's first report was used as the template for subsequent reporting in that program.
• We voluntarily report GHG emissions in the United States and Canada.
• We were the first, and remain the only, automaker participating in the Chicago Climate Exchange (CCX), North America's first GHG emissions-reduction and trading program. Through the CCX, we have committed to reducing our North American facility emissions by 6 percent between 2000 and 2010.
• We were the first automaker to join the UK's Emissions Trading System, which required us to agree to GHG emissions targets for all of our UK-based operations. This system was predecessor to the current mandatory European Union Emission Trading Scheme.
• Since 2005, GHG emissions from our European manufacturing facilities have been regulated through the EU Emission Trading Scheme. These regulations apply to eight Ford and Volvo facilities in the UK, Belgium, Sweden and Spain.
• The U.S. Environmental Protection Agency issued a final rule on September 22, 2009, establishing a national GHG reporting system. Facilities with production processes that fall into certain industrial source categories, or that contain boilers and process heaters and emit 25,000 or more metric tons per year of GHGs, will be required to submit annual GHG emission reports to the EPA. Facilities subject to the rule were required to begin collecting data as of January 1, 2010, and submit an annual report for calendar year 2010 by March 31, 2011. Many of our facilities in the United States will be required to submit reports. Our proactive approach and early action on GHG reporting globally has prepared us for this new requirement.

Our participation in these reporting, emissions-reduction and trading schemes has played an important role in accelerating our facilities' GHG emissions reduction activities.

Ford has reduced global energy consumption by 44 percent since 2000 and reduced energy consumption per vehicle by 17.7 percent during the same period. In 2009, Ford improved energy efficiency in its North American operations by 4.6 percent, resulting in savings of approximately $15 million. We measure energy efficiency in North America using our Energy Efficiency Index.1 To drive continued progress, we have set targets to improve our facility energy efficiency by 3 percent globally and 3 percent in North America in 2010.

We reduced our total facilities-related carbon dioxide emissions by approximately 50 percent, or 4.8 million metric tons, from 2000 to 2009. During this same period, we reduced facilities-related CO₂ emissions per vehicle by 27 percent. We have set a target to reduce our North American facility GHG emissions by 6 percent between 2000 and 2010 as part of our Chicago Climate Exchange commitment. The Company has also committed to reduce U.S. facility emissions by 10 percent per vehicle produced between 2002 and 2012, as part of an Alliance of Automobile Manufacturers program. Ford has already achieved a target to reduce absolute emissions from UK operations by 5 percent over the 2002–2006 timeframe, based on an average 1998–2000 baseline.

The EPA and U.S. Department of Energy again recognized Ford's energy-efficiency achievements by awarding us a 2010 Energy Star Sustained Excellence Award, which recognizes Ford's continued leadership and commitment to protecting the environment through energy efficiency. This is Ford's fifth consecutive year winning this prestigious award. The Energy Star Sustained Excellence Award requires organizations to demonstrate proficiency through the management of projects and programs, data collection and analysis, and communication actions, including community outreach and active participation in Energy Star industry forums. Among the achievements recognized by the award is a 30 percent improvement in the energy efficiency of Ford's U.S. facilities since 2000, equivalent to the amount of energy consumed by 110,000 homes.

Since 2007, we have been using a utility metering and monitoring system to collect incoming electricity and natural gas consumption data for all Ford plants in North America. We use this near-real-time information to create energy-use profiles for all Ford facilities and to improve decisions about nonproduction shutdowns and load shedding, which involves shutting down certain pre-arranged electric loads or devices when we reach an upper threshold of electric usage. During 2009, this metering and monitoring system was essential in helping us to minimize energy use during extended production slowdowns and production shutdowns. By using this tool and other best practices, Ford's manufacturing facilities reached record lows in energy use.

Ford continues to use energy performance contracting as a financing tool to upgrade and replace infrastructure at its plants, commercial buildings and research facilities. Through these contracts, Ford partners with suppliers to replace inefficient equipment, funding the capital investment over time through energy savings. Projects have been implemented to upgrade inefficient lighting systems, paint-booth process equipment and compressed air systems, and to significantly reduce the use of steam in our manufacturing facilities. Since 2000, Ford has invested more than $220 million in plant and facility energy-efficiency upgrades.

Ford has also established a three-year global effort to consolidate and redesign its data centers using best practices identified by the DOE and EPA's Energy Star program. First, we are consolidating data centers to dramatically reduce the number of managed facilities and their total energy demand. By the end of 2010, we will have consolidated 20 existing centers into just six, a reduction of 70 percent. We are also "virtualizing" 2,000 servers into just 100 physical servers. These consolidations will result in a 90 percent reduction in power needs and a 95 percent reduction in cooling needs.

During this process we are changing the layout of our remaining data centers to maximize their energy efficiency. By directing conditioned air into equipment racks as opposed to cooling entire server rooms, expensive chilled air is used much more efficiently, and the load on building cooling equipment is reduced. We have also developed and implemented global data center design specifications, so that all new and remodeled data centers will meet high energy-efficiency standards. This three-year data center initiative is projected to yield $35 million in operational cost efficiencies.

In 2010, we implemented a PC power management system to power down all of our desktop and notebook computers at night. The system, which is based on the NightWatchman® software application from 1E, overcomes many barriers of other power-down systems by allowing overnight data processing as needed, integrating power management and software delivery, and allowing custom power management solutions. We predict that this program will reduce our annual energy costs by $1.2 million and our annual CO₂ emissions by 16,000 to 25,000 metric tons.

We have implemented a network-controlled system on plant air compressors in our powertrain and vehicle assembly plants. This industry best-in-class system significantly reduces energy consumption by improving the operational efficiency of large, centralized air compressors. It allows for the real-time collection of key performance data through an enterprise-wide, web-based data management tool. This data is then used to determine the overall efficiency of each system and identify savings opportunities. The savings opportunity reports are sent to plant managers, who can then initiate corrective actions. The system also allows for remote troubleshooting of the equipment, which can extend equipment life and reduce maintenance costs. The system is also being used for remote operation of equipment at select facilities. As of January 2010, we had installed these systems at 29 plants on 181 compressors.

In addition, we are implementing a new paint process that eliminates the need for paint to cure after the prime coat. This technology, called "three wet," reduces CO₂ emissions by 15 percent and volatile organic compound emissions by 10 percent. For example, the three wet system produces 6,000 metric tons fewer CO₂ emissions per year compared to water-borne systems and 8,000 metric tons fewer CO₂ emissions per year compared to conventional high-solids, solvent-borne systems. In addition to these environmental benefits, this process maintains industry-leading quality and reduces costs. For example, three wet reduces paint processing time by 20 to 25 percent, which correlates to a significant cost reduction. The paint formulation contains new polymers and other additives to prevent running and sagging during the application process. Ford's laboratory tests show that this high-solids, solvent-borne paint provides better long-term resistance to chips and scratches than water-borne paint. In part due to the quality benefits of the three wet process, Ford tied for first place in the 2008 Global Quality Research System automotive quality survey for paint durability.2 The process is expected to reduce costs per vehicle, because it allows the elimination of a spray booth and an oven, and the attendant energy costs required to run them.

We completed the installation of a full production enamel line using the three wet process at the Ohio Assembly Plant, which started production in March 2008. In 2009 Ford installed the three wet paint process at the Chennai plant in India and the Craiova plant in Romania. We are currently installing the process at the Cuautitlán Assembly Plant in Mexico, the new Chongqing plant in China and the Michigan Assembly plant in Wayne, Michigan, which is being retooled to produce the Ford Focus. We are continuing to evaluate additional plants for three wet conversion, as refurbishment actions are being planned in line with the corporate business plan.

In 2009, Ford continued to expand the use of a new parts washing system developed in partnership with our supplier ABB Robotics. Conventional parts washing systems remove dirt chemically by spraying parts with high volumes of water and detergent at low pressure. This system, in contrast, cleans parts mechanically by moving them in front of specialized high-pressure nozzles with a robotic arm. This new robotics-based system represents a significant leap forward in energy efficiency that also improves quality, flexibility, productivity and cost. It saves energy in part because, unlike previous systems, it does not require any heat. It also uses a much smaller water pump. Forty-seven of these new robotic washing machines are now in operation at Ford, and we have incorporated the technology as standard for all engine and transmission final wash applications, ensuring that the energy and cost savings will be realized by all future vehicle programs. Most recently, we implemented robotic parts washing at our Craiova and Cologne engine plants.

We are also capturing our own waste products and turning them into fuel. We have implemented "fumes-to-fuel" technology – which captures emissions from the painting process and uses them to generate electricity – in paint shops at three of our manufacturing facilities. This process cuts down on fossil fuel use and the resulting CO₂ emissions, as well as reducing emissions from our paint shops. For more information, please see the Facilities-Related Emissions section.

In Europe, our Dagenham facility has reduced its electricity usage per engine manufactured by 12 percent over the past two years. This improvement was achieved by decreasing the use of energy-intense operations, such as the generation of compressed air for handheld tools on the production line. In addition, high-energy use equipment was scientifically optimized on Dagenham's new engine manufacturing lines. This equipment requires 70 percent less energy per engine than was used on the existing lines. In 2007, Dagenham won national awards from two organizations – Business Commitment to the Environment and Business in the Community – for the facility's CO₂ reductions, energ efficiency efforts and other environmental actions.

Other efforts to improve the energy efficiency of Ford's plant operations include:

• Aggressively curtailing energy use during non-production periods
• Updating facility lighting systems by replacing inefficient high-intensity discharge fixtures with up-to-date fluorescent lights and control systems
• Installing automated control systems on plant powerhouses and wastewater treatment equipment to increase energy and process efficiency