Operational Energy and Greenhouse Gas Emissions

Ford has been a leader in facilities-related greenhouse gas (GHG) and energy-use reductions, public reporting of our GHG emissions and participation in GHG-reduction and -trading programs.

In 2010, we adopted a goal to reduce our facility carbon-dioxide (CO₂) emissions by 30 percent by 2025 on a per-vehicle basis. This CO₂ goal, which is also based on our stabilization commitment, complements our longstanding facility energy-use reduction targets. The U.S. Environmental Protection Agency (EPA) awarded Ford a Goal Setting Certificate for this strategy at its inaugural Climate Leadership Awards Ceremony.

GHG Reporting Initiatives

• Ford is officially “Climate Registered” after publishing its complete North American carbon inventory since 2010 with The Climate Registry (TCR), a voluntary carbon-disclosure initiative that links several state-sponsored GHG emissions-reporting efforts, including the California Climate Action Registry and the Eastern Climate Registry. Ford was the first automaker to join TCR and is one of only two automakers to be officially Climate Registered. 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 the TCR’s General Reporting Protocol.

• We were the first automaker to participate in GHG reporting initiatives in China, Australia, the Philippines and Mexico. In Mexico, Ford’s first report was used as the template for subsequent reporting in that program. Ford of Mexico’s GHG report has also been third-party verified, and was recognized by Mexican authorities for this achievement.

• We voluntarily report GHG emissions in the U.S., Canada, Argentina, Australia, Brazil, China, Mexico, Taiwan and Venezuela.

• Since 2005, GHG emissions from our European manufacturing facilities have been regulated through the EU Emissions Trading Scheme. These regulations apply to five Ford facilities in the UK, Belgium and Spain.

• In the U.S., the EPA 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, are required to submit annual GHG emission reports to the EPA. Many of our facilities in the U.S. are subject to the reporting requirements and submit reports as required.

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

Performance

In 2012, Ford established a five-year objective to improve our operational energy use per vehicle globally by 25 percent by the end of 2016 based on a 2011 baseline normalized for weather and production. In 2012, we improved global energy efficiency by 6.4 percent against a 2011 year baseline normalized for weather and production levels.

We reduced our overall facilities-related CO₂ emissions by approximately 47 percent, or 4.65 million metric tons, from 2000 to 2012. During this same period, we reduced facilities-related CO₂ emissions per vehicle by 37 percent. Our total CO₂ emissions increased from 2011 to 2012 by 1 percent, while CO₂ emissions per vehicle decreased by 1 percent during that period.¹

The Company has met its commitment 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.

Please see the Climate Change and the Environment data section for more detail.

Energy Management Initiatives

Ford has achieved these efficiency improvements and energy-use reductions using the variety of initiatives described in this section. We regularly look for new technologies, approaches to the identification and definition of potential projects, funding mechanisms and means to implement plant energy-efficiency projects.

Since 2007, we have been using a utility metering and monitoring system to collect electricity and natural gas consumption data at the plant level for all Ford plants in North America. We are currently expanding this system, called the Global Departmental Level Metering (GDLM) initiative, globally and working to provide more detailed information down to the department level. We use this near-real-time information to create energy-use profiles for plants and to improve decisions about nonproduction shutdowns and load shedding, which involves shutting down certain prearranged electric loads or devices when we reach an upper threshold of electric usage. We are also upgrading and commonizing the Building Management Systems we use at our facilities. These information management initiatives will provide common reporting tools linked with production and other data sets, and with facility maintenance and control systems. These efforts will greatly improve the amount of energy data we have and the speed and quality of our energy analyses, which will help us identify energy-reduction opportunities more effectively and reduce the time required to make system changes.

We are also continuing to roll out an Energy Management Operating System (EMOS), which is aligned with our Ford Production System (FPS) and ISO 14000/50001 principles. The EMOS leverages existing lean manufacturing principles, incorporates Plan-Do-Check-Act (PDCA) protocols and uses Six Sigma tools. We developed our EMOS using a cross-functional approach that includes multiple disciplines and all operating regions of the Company. The EMOS is our mechanism for integrating energy-efficient principles into the facility design, manufacturing/engineering processes, and operations of Ford Manufacturing, Office and Engineering facilities. The system provides a common and global structure to support and maintain energy-reduction changes, to achieve the corporate goal of improving global energy use per vehicle by 25 percent between 2011 and 2016.

The EMOS is divided into four major sections:

• Plant Energy Teams – primary engagement with facilities and occupants to effect change
• Facility Changes – planning for the future (both facility and process) and getting the standards embedded into future product/project plans
• Data Management – ensure robust data for reporting and analysis
• Energy Supply and Quality – ensure reliable and low cost energy

We are currently rolling out the EMOS as part of our expanded FPS, including establishing a standardized format for Plant Energy Team meetings, Plant Energy Roadmaps, Energy Health Assessments and Energy Reporting.

In North America, 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 lighting systems, paint-booth process equipment and compressed air systems, and to significantly reduce the use of steam in our manufacturing facilities. We are also expanding the use of performance contracting to global facilities using global supplier partners to accomplish the 25 percent energy-efficiency improvement objective.

In 2012, we upgraded the lighting at several of our commercial, research and manufacturing facilities through “Mega Lighting” performance contracts. These upgrades included replacing old lighting technologies with high-efficiency (T8 and T5H) fluorescent lighting. As a result, we have reduced annual energy consumption at these buildings by 11.5 million kWh. We are developing other “Mega Lighting” projects for eight additional manufacturing sites, which we predict will reduce our annual electricity consumption by another 5 million kWh. We are also working to identify other “Mega” type projects to leverage single common actions such as lighting upgrades, compressor controls, steam conversion and enhanced Building Management Systems, in partnership with our global performance contracting partners.

Since 2000, Ford has invested more than $246 million in plant and facility energy-efficiency upgrades. In 2012 alone, we invested more than $20 million in energy-efficiency or related upgrades to our global manufacturing base. We are working across divisions and regions to ensure that energy efficiency is being addressed in our daily operations and incorporated into the manufacturing processes and facilities, as part of our future vehicle program plans.

We are continuing to replicate Ford’s state-of-the-art “Three-Wet” paint process. This technology is called “Three-Wet” because the advanced chemical composition of the paint materials used allows for the three layers of paint – primer, base coat and clear coat – to be applied while each layer is still wet, which eliminates the stand-alone primer application and dedicated oven required in the conventional painting process. The Three-Wet process also saves the electricity used by the blowers that are typically needed to circulate massive volumes of air through paint booths, and reduces the amount of natural gas needed to heat the air and ovens. As a result, Three-Wet painting reduces CO₂ emissions by 15 to 25 percent and volatile organic compound emissions by 10 percent compared to either conventional high-solids solvent-borne or waterborne 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 and curing processes. Ford’s laboratory tests show that this high-solids, solvent-borne paint provides better long-term resistance to chips and scratches than waterborne paint systems. In short, the process delivers reduced costs per vehicle, reduced CO₂, improved energy efficiency and improved quality.

Ford initially implemented the Three-Wet process at our Ohio Assembly Plant 2007 in the U.S. Since then, we have expanded implementation across our global operations when we build new facilities or refurbish existing ones.

We are continuing implementation 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. Our new standard system, in contrast, cleans parts mechanically by moving them in front of specialized high-pressure nozzles with a robotic arm. This new system represents a significant leap forward in energy efficiency that also improves quality, flexibility, productivity and cost because it uses a smaller pump and lower operating temperatures. We are now using this technology as standard for all engine and transmission final wash applications globally, ensuring that the energy and cost savings will be realized by all future vehicle programs.

We are also continuing to refine our Paint Emissions Concentrator (PEC) system (formerly referred to as “fumes to fuel,”) which reduces the CO₂ emissions associated with our paint shop emissions-treatment process. In traditional paint shop emissions treatment, the volatile organic compound (VOC) emissions from solvent-based paints are captured and destroyed in a regenerative thermal oxidizer using natural gas as a fuel. Our PEC technology concentrates VOC emissions from the painting process by approximately 1,500:1. In this super-concentrated state, the VOCs can be burned as a fuel source, significantly reducing the amount of natural gas necessary to destroy them. By reducing the need for natural gas, the PEC system has the potential to reduce CO₂ emissions by 70 to 80 percent, compared to traditional abatement equipment. We are also investigating opportunities to reform super-concentrated VOCs into hydrogen, which can then be used as a fuel source for a fuel cell. For more information on the PEC technology, please see the Facilities-Related Emissions section.

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

• aggressively curtailing energy use during nonproduction periods,
• updating facility lighting systems by replacing inefficient high-intensity discharge fixtures with up-to-date fluorescent lights and control systems, and
• installing automated control systems on plant powerhouses and wastewater treatment equipment to increase energy and process efficiency.