Case Study: Sustainable Growth in Asia

The largest – and fastest-growing – consumer demand for automobiles today is occurring in Asia, particularly in China and India. In 2010, auto sales in China alone reached more than 18 million – a stunning 10-fold increase from a decade earlier. And the numbers are only expected to grow. By 2020, annual vehicle sales in the Asia Pacific region will likely top 52 million vehicles.

At Ford, we project that 70 percent of our growth over the next decade will occur within the Asia Pacific region. To meet that demand, we have been exponentially increasing our production capacity in China, India and Thailand, making significant investments to build new plants and enlarge existing facilities. These expansions represent the largest growth our Company has witnessed in 40 or 50 years.

Our investments in the Asia Pacific region include the following:

• In Chennai, India, we are spending $500 million to double engine production capacity to 250,000 engines.
• In China, we are currently building two new plants: one in Chongqing with our joint venture partner Changan Ford Mazda Automotive (CFMA), and one in Nanchang with Jiangling Motors Corp (JMC). The $300 million Nanchang assembly plant will have the capacity to produce up to 300,000 Ford- and JMC-branded vehicles per year. In addition, we have recently signed a memorandum of understanding with CFMA to build a second new engine plant – this one for $500 million – in Chongqing.
• In Thailand, construction is underway on a new $450 million Ford assembly plant, scheduled for completion in 2012, to build the Ford Focus. And in 2010, Ford and Mazda Motor Corporation announced an additional investment of $350 million in our Auto Alliance Thailand (AAT) joint venture for pickup truck production.

As we make new investments, we look for ways to build plants that are economically, environmentally and socially sustainable – not only for Ford, but for the communities in which we operate. We are working to have positive impacts on the people who work and live near our plants by providing jobs and expanding economic opportunities. And we seek to have positive impacts on the environment by using best practices in the plants we build and by offering advanced, fuel-efficient vehicles to our Asian consumers.

Before building a new plant, our standard practice is to review a range of factors to determine the most suitable site. Ford Land’s Site Selection Matrix includes criteria such as:

• The presence of wetlands
• Water and utility infrastructure, including water quality and the water table
• Soil and topography suitability
• The cost of water and other utilities
• Proximity to suppliers, landfills and industrial waste management capacity
• Logistics options, including rail and sea
• The availability of road infrastructure
• The availability of sanitation and wastewater treatment
• Employee commute time

Building Economic Opportunities

Our new plants will support local jobs and economic growth in Asia through direct employment and by creating economic opportunities for local suppliers and supporting businesses. For example, the expansion of our plant in Chennai, India, is expected to create 1,000 new local jobs. Our new Focus plant in Thailand is expected to provide up to 11,000 new jobs: 2,200 direct jobs with Ford, and 8,800 indirect jobs through our supplier and dealer networks. Once this latter plant is complete, we also expect to purchase $800 million in local components.

Our new Asian plants will also use our latest flexible manufacturing technologies, which allow us to shift production from one vehicle to another to meet changing customer demands with little time and money required for retooling. This means we will be better able to match our manufacturing capacity with demand to maintain production and support of local employment even if our markets change rapidly.

Reducing the Environmental Impacts of Our Plants

The construction of any new facility has the potential for environmental effects, ranging from impacts on land and nature to air and water emissions to increased demand for water and other resources. We aim to minimize our environmental impacts by finding ways to reduce our use of water and other natural resources, and we attempt to mitigate biodiversity risks.

As part of our facility planning process, we have implemented new building standards that incorporate environmental best practices developed at our global facilities. We also consider LEED (Leadership in Energy Efficient Design) standards when developing new plants. Though we are not currently pursuing LEED certification for new manufacturing facilities, the standards provide useful guidance for designing energy-efficient and environmentally sustainable buildings and landscapes. Our building standards include:

• The use of advanced water-treatment technologies that allow for water reuse and that reduce water supply requirements, water discharges, the use of treatment chemicals and the generation of solid waste
• The application of dry metal machining to reduce oil use, wastewater generation, energy use and air emissions
• The advanced control of air compressors, high-efficiency lights and variable-drive electric motors to significantly reduce energy usage and monitor equipment performance
• Skylights and monitors to take advantage of natural light and reduce lighting energy requirements
• The recirculation of paint booth air and three-wet paint application to reduce the energy required for high-quality painting
• Advanced automated paint application equipment to reduce paint usage, air emissions and waste generation
• Reusable containers for shipping parts and materials
• The recovery of heat for process use from large electric motors
• The use of white roofing material to reduce energy use for cooling

Our new and expanded plants in India, Thailand, and Chongqing, China, will use our environmentally friendly “three-wet” paint process, which reduces carbon dioxide emissions by 15 percent and volatile organic compound (VOC) emissions by 10 percent from our paint shops. In addition to these environmental benefits, this process maintains industry-leading quality and reduces costs. Our new Focus assembly plant in Thailand will also feature an on-site wastewater treatment facility, energy-efficient lighting, natural ventilation in the body shop and final assembly buildings and the use of local and recycled materials. These plants will incorporate other environmentally friendly designs and technologies, including the following:

• New facilities in China are using advanced ultrafiltration water treatment technologies that enable improved treatment and reuse of the wastewater in the facility and significantly reduce the use of chemicals and the generation of solid waste associated with older treatment technologies. Additional benefits include reduced use of water and reduced waste water discharge volumes. The reclaimed water can be used for site irrigation, restrooms or even as process feed water, depending on the source of the wastewater and the secondary treatment technologies employed.
• High-efficiency lighting systems and daylighting are used in all of our new Asia Pacific and Africa region facilities, to reduce energy use and improve working conditions.
• Advanced energy management systems that control the use of electricity, motors and compressed air are included in the design of all new facilities in the Asia Pacific and Africa region, to provide power only when and where it is needed.
• Booth air recirculation is considered for every new assembly plant paint shop and often employed to reduce the energy needed to treat the paint booth supply air, which requires very precise temperature and humidity control. The new Focus plant in Chongqing and the new Transit Plant in Nanchang, both currently under construction, will employ paint booth recirculation.
• The new facilities are designed with significant green space, including vegetation irrigated with stormwater, pond water or in some cases recycled water from the facility. Stormwater management retention ponds are also used to keep any water-borne contaminants from leaving the site.
• Low- and no-VOC paints, floor coverings, wall coverings and other finishes are also being employed.

In 2010, to ensure continued improvement in environmental performance, Ford completed the full global implementation of an Environmental Operating System, which helps manage an ever-increasing range of external regulations and internal performance objectives more effectively and with fewer resources. As part of the environmental performance management process, manufacturing and environmental experts help each facility implement operational and infrastructure improvements that improve efficiency and reduce the use of electricity, fuel and water. We are making improvements all the time. For example, we have installed high-efficiency lights and motors, and advanced energy control and monitoring equipment, in our existing Asian plants.

Delivering More Sustainable Products

We are bringing fuel efficiency and low emissions to Asian consumers by offering our advanced environmental vehicle technologies. For example, we introduced the fuel-efficient EcoBoost™ engine and PowerShift transmission technologies in China in 2010 on the Ford Mondeo, and in Thailand, we introduced EcoBoost on the Fiesta. In India, we recently introduced the Ford Figo, which has highly fuel-efficient 1.4L TDCi diesel and 1.2L gas engine options. The diesel Figo has unsurpassed fuel economy in its segment. These vehicles show how we are delivering on our commitment to bring more sustainable transportation to all the markets we serve.

We have aggressive growth plans for the Asian region, so we will be equally aggressive in our efforts to develop in a sustainable, responsible manner. As we continue to announce and build new plants and expand vehicle production around the globe, we are working to make sure we are delivering on our promise to deliver both great products and a better world to all the communities in which we operate.