Ford Pledges to Slash Greenhouse-Gas Emissions 30% by 2020

Ford Motor Co. Wednesday laid out a plan to trim greenhouse-gas emissions from its fleet 30% by 2020, but the auto maker says the goal could require additional legislative action to motivate fuel companies and consumers.

Ford announced the plan in response to resolutions filed by activist shareholders seeking a commitment from the auto maker to trim tailpipe emissions. The activists, which together account for trillions of investment dollars, pulled their filings in response to Ford’s initiative.

The activists say a similar resolution has been filed with General Motors Corp., and they expect a vote during GM’s annual meeting in June.

Other auto makers, such as Honda Motor Co. Ltd., Nissan Motor Co. Ltd. and Chrysler LLC, all have set general tailpipe-emissions goals. However, they have yet to offer detailed plans, says Sister Patricia Daly, executive director of the Tri-State Coalition for Responsible Investment, and a representative for the resolution filers.

“Investors need to see the business plan,” she says during a conference call to announce Ford’s disclosure. “From our standpoint as investors, that is what is really critical here. Ford breaks important new ground by agreeing to pursue a specific and clearly defined target for climate-related emissions in their new products.”

Ford, which intends to publish an overview of the plan in its upcoming sustainability report, says the emissions goal applies to cars and light trucks in the U.S. and Europe but does not detail strategy product-by-product due to competitive reasons.

Sue Cischke, Ford group vice president-sustainability, environment and safety engineering, cites as one example Eco-Boost, the auto maker’s upcoming gasoline turbocharged, direct-injection engine technology that saves fuel without sacrificing performance.

Ford's Susan Cischke

“There is no single answer,” she says. “It will take a lot of actions, but our plan is different in that we’ll try to offer fuel improvements to everyone across the board.

“With Eco-Boost, we’re talking over 500,000 engines a year in the next couple of years, making dramatic improvements across the fleet,” she says. “We’re looking at affordability.”

Cischke also points to 6-speed transmissions and electric power steering to help attain better fuel economy and lower emissions. Looking past 2012, she cites weight reductions, hybrids and plug-in electric vehicles. Beyond 2020 are advanced technologies, such as hydrogen fuel-cell propulsion systems.

But to meet Ford’s goal of reducing greenhouse gas emissions by 2020, Cischke says, a number of other parties, such as fuel companies and consumers will have to make contributions.

One possible scheme, she says, is initiating cap-and-trade legislation, which would provide a way to reduce greenhouse gases on an overall industrial scale by limiting total annual emissions and letting the market assign a monetary value to any shortfall through trading.

Credits could be exchanged between businesses or bought and sold in international markets at the prevailing market price.

U.S. Rep. John Dingell (D-MI) made such a proposal for the 2007 energy bill. However, the idea met opposition from fuel companies and never made it into the final legislation.

“We are going to do our part, (but) it is a shared responsibility,” Cischke says. Meanwhile, the auto maker must rebound to sounder financial footing in order to make the necessary research and development investments to meet its emissions goal.

Unlike an unsuccessful pledge from Ford in 2003 to reduce SUV fuel consumption, Cischke insists the latest plan has legs.

“We have serious financial challenges,” she says, noting the auto maker will continue investing $6 billion-$7 billion annually on advanced technologies. “We need a good strong supplier base, as well. But we’re going in eyes wide open, understanding what it will take to stay on course.”

Cischke says while Ford’s plan mirrors carbon-dioxide emissions-reduction proposals in the U.S. and Europe, it would not meet California’s 30% improvement goal by 2016.

The Environmental Protection Agency has since denied that proposal, but California and more than a dozen other states intend to sue the government for the right to independently regulate.

The potential also exists for the EPA to enforce vehicle emissions at a level comparable with California’s proposal, although such rulemaking remains in the planning process.

Whatever the case, Cischke calls the California goal virtually unattainable.

“The 2020 timeframe, we believe is doable but difficult,” she says. “The 2016 timeframe… the only tool I have of even having a shot at making that is to limit sales and reduce our offers to consumers. And that is somewhere nobody wants to go. It affects our customer, dealers, suppliers, everyone.

“We’re working very hard to meet the 2020 goal and accelerating that is not possible, in our minds – 2016 is right around the corner,” she says.

Investor group leaders on the conference call applauded Ford for Cischke’s recent promotion to group vice president, which means she reports directly to CEO Alan Mulally.

“It says the company values these issues as important,” says Mindy Lubber, president of Ceres and director of the Investor network on Climate Risk. “This is about good governance. A well-managed company is addressing these issues at the highest level.”

However, Ford’s actions are only a beginning. “Ford (and) General Motors are obviously the most important auto companies in the country and a fundamental part of our economic base,” Lubber says.

“They need to do more and do so quickly to achieve leadership in the global marketplace. We can want nothing more than that, as owners of the companies. Once the embodiment of American innovation, (these auto makers) are not doing as well as they have (in the past).”

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