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 a significant 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 schemes.

• 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 are the only automaker participating in the Chicago Climate Exchange, North America's first GHG emissions-reduction and trading program.
• We were the first automaker to join the UK's Emissions Trading Scheme, 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 nine Ford and Volvo facilities in the UK, Belgium, Sweden, Spain and Germany.

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

Ford has reduced global energy consumption by 33.7 percent since 2000 and reduced energy consumption per vehicle by 10.4 percent during the same period. In 2008, Ford improved energy efficiency in its North American operations by 4.5 percent, resulting in savings of approximately $16 million. We measure energy efficiency in North America using our Energy Efficiency Index1. To drive continued progress, we have set targets to improve our facility energy efficiency by three percent globally and three percent in North America in 2009.

We reduced our total facilities-related carbon dioxide emissions by approximately 45 percent, or 4.3 million metric tons from 2000 to 2008. During this same period, we reduced facilities-related CO2 emissions per vehicle by 24 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 U.S. Environmental Protection Agency and U.S. Department of Energy again recognized Ford's energy efficiency achievements by awarding us a 2009 Energy Star Sustained Excellence Award, which recognizes Ford's continued leadership and commitment to protecting the environment through energy efficiency. This is Ford's fourth 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 35 percent improvement in the energy efficiency of Ford's U.S. facilities since 2000, equivalent to the amount of energy consumed by 150,000 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 2008, this metering and monitoring system was essential in helping us to minimize energy use during extended production slowdowns and production shutdowns. Using this tool and other best practices, Ford's manufacturing facilities reached record lows in energy use.

Ford continues to use energy performance contracts 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 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 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 also 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.

We are also implementing a network-controlled system on air compressors used in the powerhouses of our powertrain and vehicle assembly plants. This industry best-in-class system can significantly reduce energy consumption. It allows for the real-time collection of key usage data through an enterprise-wide, Web-based data management tool. This data can then be used to determine the overall efficiency of each system and identify savings opportunities. The savings opportunity reports are generated automatically and 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 2009, we had installed these systems at 29 plants on 181 compressors.

In 2008, we implemented a range of energy-saving measures at our Chicago Stamping Plant. For example, we replaced metal halide light fixtures in work bays with high-efficiency fluorescent fixtures. We also installed special controls on the plant powerhouse and wastewater treatment equipment, which will increase energy and process efficiency. These automated systems can schedule equipment startup and shutdown to match production schedules and can notify plant personnel and equipment suppliers of operational problems and equipment failures. Similar systems have been installed at our Walton Hills and Buffalo Stamping Plants.

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. In addition to these environmental benefits, this process maintains industry-leading quality and reduces costs. The paint formulation contains new polymers and other additives to prevent running and sagging during the three-wet application process. Ford's laboratory tests show that this high-solids, solvent-borne paint also 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 durability2. The process is also 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. Ford is currently installing the three-wet paint process in three other assembly facilities globally: the Chennai plant in India, the Craiova plant in Romania and the Cuautitlán Assembly Plant in Mexico. Multiple facilities in North America are being evaluated for three-wet conversion, as refurbishment actions are being planned in line with the corporate business plan.

At our Twin Cities and St. Thomas Assembly plants in 2008, we implemented a new paint pre-treatment technology that significantly reduces energy use, energy costs, water use and waste production. This technology uses zirconium oxide instead of zinc phosphate, which allows the pre-treatment process to operate at room temperature instead of an elevated temperature. The new process also requires fewer steps, further reducing energy consumption. The technology has already resulted in a $150,000 savings in energy costs at each plant.

In 2008, Ford also began implementing a new parts washing system developed in partnership with our supplier ABB Robotics. This technology reduces the amount of energy used in the parts washing process by more than 60 percent and reduces energy costs by approximately 90 percent. For more information, please see the Minimum Quantity Lubricant machining case study.

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 Volatile Organic Compounds section.

In Europe, our Cologne Merkenich Development Center implemented a heat-energy reclamation joint venture with the local utility RheinEnergie. In early 2009, the Cologne facility was connected to one of RheinEnergie's boiler houses via a 2.6 km pipe. This pipe transfers what was formerly waste heat to a heat exchanger, which then reuses that heat to produce electricity. This system reduces CO2 emissions from the Cologne site by 191,000 metric tons per year. Ford and RheinEnergie signed an agreement to maintain this heat-exchange partnership for at least 10 years.

In 2008, Ford continued to participate in legislative and regulatory processes concerning renewable energy portfolios and energy efficiency strategies. Ford participates in these processes at the local, state and federal level by advocating for the use of energy efficiency as part of the long-term solutions for meeting electric generation needs and reducing greenhouse gas emissions. We also advocate for the use of programs such as the EPA's Energy Star Industrial Focus Groups as a model for developing strategies to benchmark industrial energy efficiency. Ford supported Michigan's and Ohio's new renewable portfolio standards, which include requirements for energy efficiency.