4
The Automotive Industry

Background

The U.S. automotive industry is composed of three major U.S.-based manufacturers (Chrysler, Ford, and General Motors),1 several non-U.S.-based (transplant) vehicle assemblers, and a vast network of parts and components suppliers. Collectively, the industry produces and sells approximately 15 million cars and light trucks each year. Total sales in 1997 were nearly $500 billion, and total employment was nearly 1 million. Manufacturing facilities include small specialty-parts plants, large foundries and engine and transmission plants, and vehicle assembly plants, which employ thousands of people and produce several hundred thousand vehicles per year.

Automobile Manufacturing

The industry's main products are automobiles, light and heavy trucks, and sport utility vehicles. These are produced using various casting, stamping, molding, welding, painting, and assembly processes. Each operation poses a unique set of environmental challenges. In addition, while automobile manufacturers do not directly recycle vehicles, their products, at the end of life, are extensively recycled through independent dismantlers and shredders (Figure 4-1). A portion

1  

The merger of the German conglomerate Daimler Benz and Chrysler took place after the bulk of this study had been completed. Although this reduces the number of U.S.-based automakers from three to two, the effects of the merger, particularly over the next several years, should have little bearing on the observations and recommendations contained in this report.



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--> 4 The Automotive Industry Background The U.S. automotive industry is composed of three major U.S.-based manufacturers (Chrysler, Ford, and General Motors),1 several non-U.S.-based (transplant) vehicle assemblers, and a vast network of parts and components suppliers. Collectively, the industry produces and sells approximately 15 million cars and light trucks each year. Total sales in 1997 were nearly $500 billion, and total employment was nearly 1 million. Manufacturing facilities include small specialty-parts plants, large foundries and engine and transmission plants, and vehicle assembly plants, which employ thousands of people and produce several hundred thousand vehicles per year. Automobile Manufacturing The industry's main products are automobiles, light and heavy trucks, and sport utility vehicles. These are produced using various casting, stamping, molding, welding, painting, and assembly processes. Each operation poses a unique set of environmental challenges. In addition, while automobile manufacturers do not directly recycle vehicles, their products, at the end of life, are extensively recycled through independent dismantlers and shredders (Figure 4-1). A portion 1   The merger of the German conglomerate Daimler Benz and Chrysler took place after the bulk of this study had been completed. Although this reduces the number of U.S.-based automakers from three to two, the effects of the merger, particularly over the next several years, should have little bearing on the observations and recommendations contained in this report.

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--> Figure 4-1 Economic players in the automotive sector. SOURCE: Adapted from Fischer and Schot (1993). of the recycled parts and materials becomes inputs to various automotive processes; the rest is used elsewhere in the economy. Each year approximately 10 million automobiles, buses, trucks, and motorcycles are processed by dismantlers, who supply 37 percent of the nation's ferrous scrap (American Automobile Manufacturers Association, 1994). Drivers of Environmental Performance Improvements The life cycle of a typical automobile and the various processes associated with different parts of the cycle are shown in Figure 4-2. Within this life cycle, efforts to improve environmental performance are focused on manufacturing processes, product use, and end-of-life recycling. In manufacturing, attention is paid to the solid-, liquid-, and gas-phase emissions from operations, as well as to materials and energy usage; product-related concerns focus primarily on exhaust emissions and energy use. Regulation is the primary driver of environmental change in the industry. Federal regulations that affect automobile manufacturing include the Clean Air Act (CAA), the Clean Water Act (CWA), the Resource Conservation and Recovery Act (RCRA), Superfund Amendments and Reauthorization Act (SARA), and the Pollution Prevention Act of 1990. The primary metrics used are derived from these regulations, their amendments, and other negotiations resulting from proposed rule-making. Environmental progress reported by the automobile companies relates primarily to these regulations, government-initiated voluntary efforts such as the

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--> Figure 4-2 The life cycle of the automobile and the processes that occur during that cycle. The processes listed at the bottom of the chart are keyed by number to the life-cycle steps shown in the flow diagram. SOURCE: Graedel and Allenby (1997). Copyright ©, 1996, Lucent Technologies. Used by permission.

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--> U.S. Environmental Protection Agency's (EPA) 33/50 program,2 and regional initiatives such as the Great Lakes persistent toxics (GLPT) program.3 Automakers also undertake pollution prevention efforts to improve water-, materials-, and energy-use efficiencies. Details of specific actions taken and the cost savings that have accrued are well documented by the Michigan Department of Environmental Quality (1998a). Competitive pressures, particularly from overseas manufacturers, along with the advent of information technologies and new management techniques have also prompted dramatic changes in automotive design and manufacturing processes. Total quality management, just-in-time inventory control, concurrent engineering, and lean-production techniques are some of the approaches that have been implemented by domestic manufacturers and suppliers to maintain competitiveness. Many of these initiatives have minimized inputs during production and led to cleaner production as well. Life-cycle management (Kainz et al., 1996) and design for environment practices (Ford Motor Company, 1998) are beginning to be used in the industry to meet regulatory and internal environmental goals. The automotive industry's product—the vehicle—is also heavily regulated. Following the Organization of Petroleum Exporting Countries oil embargo that led to a tripling of oil prices in the early 1970s, the Energy Policy and Conservation Act (EPCA) of 1975 was passed. The law introduced minimum corporate average fuel economy (CAFE) standards for cars and light trucks. CAFE standards are calculated for car and light truck categories for each producer's fleet. Producers are penalized for each mile-per-gallon deficiency per vehicle, although credits for surpassing the standard can be earned. Until enactment of EPCA and CAA, increased horsepower and performance were obtained by using larger engines (National Research Council, 1992). This legislation, and several other laws that followed, made the production of lighter-weight vehicles and smaller engines with lower exhaust emissions an industry goal. Through the 1980s and early 1990s, increased computerization of automobile functions, introduction of 2   EPA's 33/50 program (also known as the Industrial Toxics Project) is a voluntary pollution reduction initiative that targets releases and off-site transfers of 17 high-priority toxic chemicals. Its. name is derived from its overall national goals—an interim goal of 33 percent reduction by 1992 and an ultimate goal of a 50 percent reduction by 1995, with 1988 as the baseline year. The 17 chemicals are from EPA's Toxic Release Inventory. They were selected because they are produced in large quantities and subsequently released to the environment in large quantities; they are generally considered to be very toxic or hazardous; and the technology exists to reduce releases of these chemicals through pollution prevention or other means. Although the goals have been met (a 40 percent reduction was achieved by 1992, and 50 percent reduction was reached ahead of schedule in 1994; United States Environmental Protection Agency, 1999), companies continue to track these 17 chemicals. 3   The GLPT program is a partnership between industry and government to reduce the use of 65 toxic chemicals identified as significantly impacting the Great Lakes.

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--> advanced materials, and a redesigned internal combustion automobile engine led to a significant decrease in engine size (over 1,500 cubic centimeters from 1974 to 1992) with no loss in horsepower (except for a dip in power in the late 1970s and early 1980s; National Research Council, 1992). On another front, the industry is (and continues to be) challenged by regulatory demands for alternative fuels. For example, in response to the ''energy crisis'' of the 1970s and 1980s, several fuel alternatives to petroleum were developed. More recently, the Energy Policy Act of 1992 included several reformulated-fuel mandates aimed at lowering automobile hydrocarbon and carbon dioxide emissions. Regulatory and competitive pressures have also resulted in several alternative-vehicle initiatives, such as the Partnership for a New Generation of Vehicles (PNGV). PNGV is a collaborative research and development program between the U.S. government and the U.S. Council for Automotive Research (USCAR), whose members are Chrysler, Ford, and General Motors. Its aim is to develop vehicles with fuel efficiency of up to 80 miles per gallon that will cost no more to own and operate than current comparable vehicles (e.g., the 1994 Chrysler Concorde, Ford Taurus, and Chevrolet Lumina; United States Department of Commerce, 1995). It is unclear if life-cycle assessments of the environmental impacts of the 80-miles-per-gallon cars will show the vehicles to be environmentally superior. For example, the new materials required will make recycling more difficult and less economical. Current use of Environmental Performance Metrics Environmental performance metrics have emerged in the automobile industry in response to regulation and to take advantage of opportunities to improve efficiency. The metrics are summarized in Figure 4-3. Manufacturing-related metrics allow companies to track material inputs to gain the maximum material-use efficiencies, pay attention to energy and water used in manufacturing, and track emissions from manufacturing operations. Product-related metrics relate to fuel economy and tailpipe emissions of hydrocarbons (HCs), oxides of nitrogen (NOx), and carbon monoxide (CO). In addition, the industry tracks vehicle recycling. Manufacturing Metrics Environmental metrics in auto manufacturing focus on waste and emissions and efforts to control them. Several sources of information are available, including Toxic Release Inventory (TRI) reporting (as required under the Emergency Planning and Community Right-to-Know Act of 1986, a part of SARA Title III), corporate annual reports, and reports from various voluntary partnerships. These, however, do not provide a complete picture of the environmental performance of

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--> Figure 4-3 Environmental performance metrics in automobile production. NOTE: CM1 = Manufacturing emissions (other than TRI, 33/50, GLPT, and SARA Title II chemicals); CM2 = Toxic Release Inventory chemicals; CM3 = 33/50 chemicals; CM4 = Great Lakes persistent toxics; CM5 = SARA Title III chemicals; E1 = Energy; M1 + M1R = Parts, components, raw materials, and recycled materials; M2 + M2R = Water and recycled water; M3 = Packaging waste; M4 = Solid waste (excluding packaging); PM1 = Tailpipe HC, NOx and CO emissions; PM2 = Evaporative emissions; PM3 = Tailpipe CO2 emissions; PM4 = Recycled material from manufacturing process and product; HHSM = Human health and safety.

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--> the industry. Waste and emissions from this sector are distributed among suppliers as well as the Big Three manufacturers. The large supplier base makes aggregating environmental metrics very difficult. In general, however, the sector relies most on metrics to track wastes and emissions and metrics to manage materials, energy, and waste flows. Waste and Emissions The various gross inputs to and outputs from automotive manufacturing processes are shown in Figure 4-4. Nonproduct outputs include waste material, some of which is reused or recycled, and liquid or gaseous emissions. Wastes and emissions are measured and reported in a variety of units (e.g., total quantities generated per year, quantities per unit product). Reporting of TRI emissions provides the most common metric in the industry. The TRI contains specific information about the release and transfer of toxic chemicals. Transferred chemicals are those that are geographically or physically separate from a facility but still under its control. More than 576 chemicals and 28 chemical categories were included in the 1997 TRI. Any industrial facility with at least 10 full-time employees and that manufactures or processes 25,000 lbs. or uses 10,000 lbs. of a listed chemical has to report its emissions. Since 1988, Chrysler, Ford, and GM together have reduced TRI releases by 53 percent, when normalized against production volume (American Automobile Manufacturers Association, 1998). Box 4-1 provides an example of how process changes resulted from efforts to reduce toxic emissions. Other voluntary efforts, such as the EPA's 33/50 and GLPT programs have similarly led to tracking of specific chemicals with the goal of reducing their use or emission. In both of these efforts, similar reductions have been achieved. Since 1988 the Big Three automakers have reduced the emission of 33/50 chemicals by over 60 percent on a per-vehicle normalized basis (American Automobile Manufacturers Association, 1998). Trends in the release of GLPT chemicals (Figure 4-5) suggest that since 1991 there has been a reduction in aggregate releases (when zinc is excluded). The anomaly for zinc is due to foundries recycling zinc-galvanized metal, which accounted for over 50 percent of all GLPT substance released. Zinc releases are the result of increased recycling of galvanized steel, which has been used for body-panel corrosion protection. When normalized by vehicle production volumes, overall releases of GLPTs have decreased by 9 percent since the GLPT program began in 1991. When zinc releases from the foundries are excluded, the industry boasts a 54 percent decrease in GLPT emissions since 1991. The goals of reducing TRI, 33/50, and GLPT chemicals have been mainly achieved through specific pollution prevention actions, process improvements, and recycling. These efforts have been documented in numerous automotive industry case studies reported to the Michigan Department of Environmental Quality (1998c).

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--> Figure 4-4 The life cycle of a typical automobile. The life-cycle flow is from bottom to top. Materials and energy inputs enter from the left; residues leave to the right. NOTE: VOCs = volatile organic compounds. SOURCE: Graedel and Allenby (1997). Copyright ©, 1996, Lucent Technologies. Used by permission.

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--> BOX 4-1 Process Change Eliminates the Use of TCE Ford's Climate Control Division makes aluminum heat exchangers, such as radiators, heater cores, condensers, and evaporators. In the traditional process, trichlorethylene (TCE) is heated and used to degrease the very thin aluminum parts that are used to make the heat exchanger. After cleaning, the parts are assembled and brazed together as a coherent and leak-free unit. Although the degreasing process includes a TCE vapor collection system, some TCE remains on the high-surface-area parts and evaporates outside of the process equipment. A significant percentage of all the chlorinated solvents released annually by the company is due to this evaporation. One alternative that appeared to have potential for replacing the TCE in this process was the use of a detergent and aqueous solution (water wash) that would not etch or damage the aluminum parts. A variety of detergents were tested. The two best-performing classes of detergents were then used in low-volume trials. At the same time, a design for a detergent and aqueous system was developed. With assistance from a supplier, an enclosed-water-spray system was chosen, in which the parts were moved through the spray areas by a belt feeder. The washer had three sections: a prewash for easy-to-remove oil, detergent wash to loosen and remove oil attached to the part surface, and a water rinse. A low-volume aqueous pilot evaluation proved that the detergent alternative was compatible with current and future braze processes, and the system is now being used to reduce the company's dependency on TCE. SOURCE: Michigan Department of Environmental Quality (1998b). The largest point-source emissions in the automotive industry are volatile organic compounds (VOCs) used as paint solvents. Fifty solvents found in paints and adhesive solvents are among the 189 hazardous air pollutants regulated under Title III of the Clean Air Act Amendments of 1990. VOC emissions from these solvents occur during application, curing, and equipment cleaning operations. Several innovative paint technologies aimed at reducing the VOC burden associated with conventional solvent-base paint are emerging. Table 4-1 shows the goals, metrics used, and results of research conducted by the USCAR Low Emission Paint Consortium and several other cooperative research and development programs. Resource Use Auto industry efforts to more efficiently use materials and energy have been driven by opportunities to reduce costs. Quality and just-in-time practices have targeted all materials used in the manufacturing process for efficiency improve-

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--> Figure 4-5 Great Lakes persistent toxic substance reportable production normalized and total releases for facilities belonging to the American Automobile Manufacturers Association. SOURCE: American Automobile Manufacturers Association (1998). ments, including toxic materials covered under TRI such as asbestos, mercury, and lead. Metrics that may be used to track gains in resource-use efficiency include dollars saved, pounds of materials used per year, or kilowatt-hours consumed per vehicle produced. In addition to improving resource efficiency, the industry is preventing pollution through the substitution of new parts or processes, a practice that requires sophisticated analysis and decision making. For example, Chrysler uses an

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--> approach it calls life-cycle management (LCM). LCM is used to evaluate costs for process changes (or alternative parts or components) together with environmental, occupational health and safety, and recyclability factors that are not considered in a traditional business analysis. Using LCM, Chrysler developed an underhood lighting system switch that eliminated mercury. Although the purchase price of the new switch was greater than that of the mercury—containing switch, its life-cycle costs were less (Box 4-2). Energy or fuel appears as an input at every stage in the manufacture of vehicles (Figure 4-4). Energy is used to refine and process the raw materials, make the parts and components, assemble the vehicle, and deliver the product to showrooms. A recent life-cycle inventory estimated that about 164,000 MJ are used to produce a generic car (United States Automotive Materials Partnership, Life-Cycle Assessment Special Topics Group, 1997). This is the energy used in the production of materials and the manufacture of the vehicle only, not in vehicle use. Total water use by the industry is also tracked, as is water use normalized according to liters per vehicle produced. Figure 4-6 reveals that water usage is heaviest during manufacturing and in processes that require a significant amount of cleaning. Concern over water use is often closely linked to local availability of this resource; the industry is making efforts to reduce water use across the board (Box 4-3). Reuse, Recycle, and Disposal Solid waste associated with a typical automobile (1,370-kg car) is shown in Figure 4-7. These and other wastes have been the target of industry reuse and recycling efforts. Typical recycled quantities for one company are shown in Table 4-2. Reuse and recycling are important in ongoing efforts to optimize, as cost effectively as possible, energy use and material life cycles. In general, reuse and recycling occur together, and the metric used is the amount of solid waste generated. By tracking this value over time, trends can be monitored (Figure 4-8). This metric can be expressed in tons per vehicle for both hazardous and nonhazardous wastes. Reductions can be expressed in dollars saved or in percent reduction achieved. Lists of material types that are recycled, expressed in number of pounds per vehicle, are maintained by automobile makers. This provides companies with the opportunity to track and report on the recycled content of their products. Reuse by suppliers has also been encouraged throughout the industry. Working with suppliers, auto companies have reduced the costs of their own solid waste management and the costs of supplier packaging by requiring that materials delivered to plants be packaged in returnable dunnage. Progress in reducing packaging waste is shown in Figure 4-9. Other areas that show potential for reuse are also being explored, as illustrated by the initiative to reuse plastic (Box 4-4).

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--> Table 4-3 Environmental Performance Metrics, Drivers, and Environmental and Business Motivations Metric Driver Environmental and Business Motivations Manufacturing emissions (CM1) R Federal and local discharge limits and operating permits Toxic release inventory (CM2) R EPA list associated with health concerns 33/50 Chemicals (CM3) V 17 selected chemicals from TRI list for early action Great Lakes persistent toxics (CM4) V Concern for Great Lakes ecosystems and transfer to humans via food chain SARA Title III chemicals (CM5) R Concern for soil and groundwater contamination Energy (E1) V Reduce total energy consumption and operating costs Materials (M1, M1R) V Improve materials use efficiency Water (M2, M2R) V Reduce water use and operating costs Packaging waste (M3) V Reduce landfill waste and disposal cost Solid waste (M4) V Reduce landfill waste and disposal cost Tailpipe HC and NOx emissions (PM1) R Reduce urban ozone to protect public health Evaporative emissions (PM2) R Reduce HC emissions contribution to tropospheric ozone production Tailpipe CO2 emissions (PM3) R Limited via CAFE standards to reduce gasoline consumption and global warming gases Recycled waste (PM4) V Reduce landfill waste and disposal cost Human health and safety (HHSM) R Healthy and safe workplace for employees, safe products for customers NOTES: CM1, CM2, CM3, CM4, CM5, E1, M1, M1R, M2, M2R, M3, M4, PM1, PM2, PM3, PM4, HHSM refer to metrics shown in Figure 4-3. R = regulation driven; V = voluntary.

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--> used, identifies them as either regulation driven or voluntary, and presents the business or environmental motivation behind the metric. Automotive industry environmental performance metrics can also be presented according to whether they are used in manufacturing or with end products (i.e., vehicles; Table 4-4). Product metrics can guide decision making in the design and development stages. Human health and safety metrics—both manufacturing and product related—are included in this set of metrics, since they have historically been a key component of environment, health, and safety management programs. Challenges And Opportunities A plethora of environmental performance metrics is currently used internally by the auto industry. Many are driven by regulatory requirements, others by self-interest. The pressure is on—locally, nationally, and globally—to continually improve the environmental performance of the industry's operations and products. In addition, the globalization of the automotive industry and the search for fundamentally new vehicle technologies is expected to challenge the competitiveness of the industry throughout the coming decades. As demand for im- Table 4-4 Environmental Performance Metrics Used in Automotive Manufacturing and Vehicle Use Manufacturing Vehicle Use Resource Related Energy used in manufacturing by facilities (total by company and per vehicle produced) Water used Gasoline consumed (miles/gallon) Maintenance materials (per vehicle) Repair parts (per vehicle) All metals recycled (75% of vehicle mass) Environmental Burden Related TRI 33/50 Chemicals Great Lakes persistent toxics SARA Title III chemicals Solid waste (per vehicle) Gaseous/liquid emissions Tailpipe HC, CO, and NOx emissions (grams/mile) Evaporative emissions (grams/test) Tailpipe CO2 emissions (grams/mile) Landfilled shredder residue (25% of vehicle mass) Human Health and Safety Oil mist Hazardous chemicals handling Plant-level noise Ergonomics Crash worthiness Occupant protection Driver behavior

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--> proved environmental performance grows, metrics will be needed that are easy to understand, related to quantifiable environmental impacts, and based on good business principles. Emerging Issues The automotive industry produces vehicles that many regard as necessities in the modern world. As a result, the industry's environmental goals are strongly interwoven with those of society and government. Significant engineering challenges lie ahead. In the near term, demands for more fuel efficient vehicles are expected to grow as nations around the world try to reduce CO2 emissions to address concerns about global warming. Meeting the demand for personal mobility on a global scale and addressing the associated traffic congestion problems will pose an additional challenge and add to the complexity of developing relevant environmental performance metrics to guide decision making. Continuation of Increased Demand Vehicle use is ubiquitous. There were approximately 200 million vehicles registered in the United States and an additional 450 million registered in other parts of the world in 1996 (America Automobile Manufacturers Association, 1997). These vehicles consume large amounts of fossil fuel every year, thereby contributing to such environmental burdens as air pollution. The overall energy impact of vehicle use exceeds the energy impact of vehicle manufacture by about a factor of five, a situation similar to that in the electronics sector. (See Chapter 6.) Although the amount of pollution generated per vehicle has decreased due to more efficient pollution control technologies, the demand for vehicles continues to increase worldwide; thus, the amount of pollution generated by vehicle production and use continues to rise. The large number of vehicles in use and the potential growth in demand for new vehicles leads to a huge after-market for used vehicles. This may have various environmental impacts as a consequence of the way such vehicles are operated, serviced, recycled, and disposed of. Regulations on vehicle emissions apply to both new and in-use vehicles. For example, emissions control systems are designed to meet a required durability metric of 100,000 miles. In both the newand the used-vehicle markets, the industry is served by a large number of small service providers and dealers engaged in recycling parts and spent fluids (e.g., engine and transmission oil, brake fluids, and coolants). Ensuring the adequacy of these practices and the ultimate disposal of used vehicles is a serious concern. Many of the emissions issues related to vehicle manufacturing are similar to those in other industries. Their management, however, poses special challenges to the automotive industry and others (e.g., the aircraft industry) that deal with a

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--> vast supplier base and complex assembly operations. In the case of automobile manufacturing, production involves thousands of small and large suppliers in many manufacturing industries around the world. Each automobile company has a unique collection of parts and processes. The selection of materials and processes can change frequently within a plant and can be different from one plant to the next and from one supplier to another. Deciding on what type of information to track and report (other than that required by regulation) can be a daunting task. When it comes to monitoring environmental performance, data on manufacturing emissions from individual plants tend to give a fragmented view. Aggregated amounts and types of emissions from all plants may provide a more complete picture but very little guidance for taking action. Goals set at the corporate level are important to that prioritization. Business Implications Traditionally, costs associated with handling, treating, and disposing of manufacturing wastes are not fully incorporated as line items in accounting records. This leads to missed opportunities to highlight cost savings and waste reduction achieved through conservation of resources, recycling, and reuse. Efforts to capture some of these hidden costs include Chrysler's LCM evaluation of nontraditional costs as part of the company's search for low-cost alternatives that reduce environmental, health, and safety impacts. In general, however, these techniques still require improvement. Other costs not fully accounted for include those associated with owning and operating vehicles (e.g., repairing or replacing pollution control devices) and those related to vehicle use such as construction and maintenance of roadway systems. Varied tax and incentive schemes for different types of fuels, as well as different fuel taxes in different parts of the world, impact these and other environmental costs. There are also questions about how one captures tangible and intangible environmental benefits. Some cost avoidance or savings due to better environmental management (e.g., reuse, recycling, material replacement, waste minimization) can be quantified. However, there are many environmental benefits that are difficult to incorporate into the bottom line. It is also unclear whether there is a sufficient customer base for ''environmentally friendly'' products or whether customers are willing to pay more for a product's environmental attributes. Evidence from the types of vehicles that people purchase and from company market surveys indicates that customers consider environmental improvements to be important features but unimportant to the final purchase decision. Finally, there are many rules of thumb regarding what constitutes an environmentally preferable manufacturing process (e.g., reduce, reuse, recycle, eliminate), but there is little agreement on key definitions or on how to quantify environmental superiority. These important issues need to be addressed if the environmental perfor-

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--> mance of a company is to be measured and compared with that of other firms in a meaningful way. Globalization As the automotive industry becomes more global, issues related to manufacturing and vehicle emissions become increasingly complicated. Regulations for controlling and managing emissions vary from one country to another. Economic conditions and public expectations for environmental performance also vary. As a result, environmental management needs to be carried out locally to meet local regulations but with a global perspective. The industry expects to face new environmental standards. Although regulations have led to some innovations, regulatory approaches do not elicit the most creative solutions. Flexible incentive-based approaches will more effectively stimulate future innovations. Risk-based approaches, which prioritize concerns on the basis of environmental or health risks, are gaining acceptance in the industry as a means of defining environmentally significant emissions. These can also act as a basis for setting standards globally. Currently, companies handle differences in global standards and regulations by harmonizing and standardizing environmental practices across geographical, political, and cultural boundaries. Such steps may include instituting environmental auditing, waste control, treatment facility design, pollution prevention, waste minimization, resource conservation, and risk reduction programs. Standardization and Definition The automotive industry has considerable data on environmental metrics. These can be assembled in various forms. For example, GM's environmental report complies with Coalition for Environmentally Responsible Economies guidelines and provides detailed information about its environmental performance. The absence of similar types of reporting makes comparisons of environmental performance among different corporations difficult. A key challenge for the auto industry is international standardization of environmental performance metrics and reporting practices. Interpretations of environmental metrics in automotive manufacturing need to take into account the different degrees of vertical integration among U.S.- based companies. (Vertical integration reflects the extent to which a company manufactures the parts it needs for production.) A metric expressed in pounds per vehicle produced may be different for otherwise comparable vehicles because of differences in vertical integration and supplier chains among manufacturers. Metrics need to account for these differences. The same difficulty applies to comparison of financial metrics. Intercompany comparisons aside, however, the numerical values for a specific company are important for tracking its progress

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--> over time. Standardizing and defining metrics will be critical to improving environmental performance over the near term. Emerging Opportunities Several foreign-owned and U.S. automobile companies are already using environmental criteria to advertise and market their products. On the investment front, some in the financial community are beginning to use an environmental performance screen as an additional tool in making investment decisions (Deutsch, 1998). As a result, companies of equal standing in all other areas gain an advantage by demonstrating superior environmental performance. New and Possible Future Metrics Many of the metrics currently used are empirical, defined somewhat intuitively, and have their origin in regulations. The automotive industry seeks metrics that are easy to understand, are related to quantifiable environmental impacts, and are tied to business performance metrics such as return on assets, customer responses, and operating costs. If environmental performance metrics can be linked to business performance metrics, corporate efforts to reduce environmental impact will follow. Development and Implementation of New Environmental Performance Metrics Before developing an environmental performance metric, it is important to evaluate how the metric will be used. Considering the complexity of the automotive industry, simple empirical metrics may provide a limited view of overall environmental performance. Misuse of such a metric could be more confusing than not using it at all. For example, a metric such as pollutant generated per vehicle produced could be misleading if it were used to compare plants either within a company or between companies, because each plant may have different starting materials and processes even if each is producing the same end product. Therefore, clear boundaries need to be defined for any comparison and the results of such comparisons carefully evaluated. Using life cycle inventory (LCI) as a basis for developing environmental metrics is appealing because the intent of the methodology is to consider many environmental burdens in a systematic way. The complete methodology entails doing an inventory of inputs and outputs and an assessment of associated environmental impacts. Despite attempts to incorporate weighted impacts in LCIs (Horkeby, 1997), its primary application is in conducting inventories to guide decision making. The LCI considers all aspects of producing vehicles, starting from materials and parts production (suppliers) to final assembly by an automo-

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--> tive company, use of the vehicles by customers, and end-of-life disposal. The results of an LCI study show the energy profile for producing, using, and disposing of a vehicle, as illustrated in Figure 4-11. In this example the vast majority of energy used by a vehicle over its lifetime is consumed during its service life. This shows just one aspect of the LCI, and the metrics based on energy usage alone could be misleading. Figure 4-8, which presents lifetime water usage data, shows the dominance of manufacturing, quite a different picture from energy consumption. Another factor in developing viable environmental performance metrics is the differences in market demand and economic growth between industrialized and industrializing countries. Metrics that merely report on total quantities of emissions or resources do not capture the differences in economic development among different countries. Comparisons of environmental performance between companies in different countries have to be made with care, taking into account differences related to such things as gross domestic product, the maturity of the industry, infrastructure, and labor costs. Possible Future Metrics There are several candidates for new metrics that could be used to gauge environmental performance in the automotive industry. None provides a comprehensive picture of the industry's environmental performance. Therefore, their limitations should be carefully considered if they are to be used to make comparisons in the environmental performance of different companies or industries. Resource-Use and Pollutant-Generation Metrics Environmental performance can be linked to the quantities of resources, including energy, raw materials, water, and air, required to produce vehicles. Resource use could be expressed as water (m3)/vehicle, air (m3)/vehicle, energy (kWh)/vehicle, steel (tons)/vehicle, or plastics (tons)/vehicle. A method could be devised to combine some of these. These units would provide a measure of the efficiency of manufacturing processes and product use. These units, however, would reflect environmental impacts only indirectly. Metrics related to the pollutants generated during vehicle manufacture and use could be expressed as tons of TRI chemicals, hydrocarbons, CO2, toxic metals, and chemical oxygen demand (COD) released per vehicle. These metrics would show the efficiency of controlling the generation of pollutants. By combining the above two groups of metrics, normalized metrics could be developed to reflect efficiencies of resource use and pollution minimization. These might reflect tons of TRI chemicals released/m 3 of water used, tons of TRI chemicals released/kWh used, tons of total hydrocarbons released/ton of steel used, and tons of COD released/m 3 of water used.

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--> These normalized metrics would have several potential advantages. They would be easy to understand, could be used for the whole product life cycle or individual manufacturing processes, would reflect the degree of resource recycling and reuse, and would relate to sustainable development. Business-Related Metrics One glaring deficiency in the current set of environmental performance metrics is the lack of a metric that is strongly linked to customer satisfaction. For example, in the case of CAFE, it has been shown that while energy efficiency improvements to vehicles have been made for a range of different reasons, there is a dissonance between efficiency standards and market signals.4 Metrics that capture less tangible values, such as a vehicle's "environmental performance," in terms of customer "utility," would marry both environmental and business imperatives. In this circumstance, environmental performance and utility are subjective and need to be further defined. For example, utility could mean just getting from point A to point B, or it could also include deriving a certain level of pleasure from the trip. Such societal metrics would vary from one culture to another. These more sophisticated metrics are currently missing in the suite of simpler resource use and pollutant-related metrics. There are a range of other measurable business metrics that have environmental implications. For example, the durability of emissions control systems has a huge effect on used-car resale values in many countries. There is a disconnect between metrics such as the frequency of repair or a warranty extension option on emissions control systems and environmental performance metrics. There are two needs in this regard: a better understanding of system interactions, 4   The CAFE approach to improving energy efficiency (often a surrogate for environmental improvement) places manufacturers in an awkward position in the marketplace. According to the National Research Council (1992): [CAFE] system constrains consumer choice—at least in the aggregate—to vehicles with characteristics that differ from those that otherwise would be offered. In effect the manufacturers are required to sell vehicles with higher fuel economy regardless of consumer interest in purchasing such vehicles. A rational consumer—other things being equal—should always prefer a fuel-efficient vehicle over a fuel-inefficient vehicle. But, in fact, an increase in fuel economy can impose costs: the financial costs of the technology to achieve fuel economy and the costs reflected in reduced vehicle size, decreased performance, and other undesirable attributes. To the extent that improved fuel economy is achieved at the expense of other characteristics of the vehicle that the consumer values more, the manufacturer is being required to try to sell a product that does not reflect consumer demand. The consequences are an undesirable diminution in consumer satisfaction and, presumably, a reduction in overall automotive sales. In short, over the last several years, there has been a growing dissonance between CAFE standards and market signals as the real price of gasoline has fallen. (p. 169)

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--> such as the connection between the life of emissions control systems and the life of the entire vehicle, and incentives for developing better modular upgradable systems that can lead to longer warranties. Table 4-5 summarizes several possible future metrics that may be used to further refine the assessment of the environmental performance of the automotive sector. Summary While many of the metrics associated with the automotive sector are driven by regulation, some are voluntary and business driven. Wherever possible, the latter two types of metrics should be integrated into assessments of environmental performance. For clarity the metrics being used in the automotive industry were discussed in terms of manufacturing and product use. Metrics used for manufacturing include emissions (e.g., TRI releases, VOICE emissions, and wastewater discharges), recycling and reuse (e.g., solid waste generation and reuse of plastics), and resource use (e.g., energy and chemicals). Metrics used to monitor product performance include tailpipe emissions (e.g., CO, NOx and hydrocarbons) and resource consumption (e.g., fossil fuel use and CO2 generation). The automotive industry has been steadily improving its environmental performance, but many challenges to developing ideal metrics remain. These in- Table 4-5 Potential Future Environmental Performance Metrics, Drivers, and Environmental and Business Motivations in the Automotive Industry Metric Driver Environmental and Business Motivations Resource use V A measure of efficiency in manufacturing and product usage Pollutant generation R A measure of efficiency in controlling pollutants Pollutants generated per resource used V A measure of efficiencies in both resource use and pollutant generation Utility-based environmental performance V A measure of environmental performance based on customer utility Repair frequency of pollution control devices V Reflects the quality and resale values of vehicles and customer satisfaction Warranty cost on pollution control devices V Reflects the quality and resale values of vehicles and customer satisfaction NOTE: R = regulation driven; V = voluntary.

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--> clude combining environmental, social, global, and cultural issues associated with producing and using vehicles worldwide; quantifying intangible environmental benefits and incorporating them into the business bottom line; taking into account differences and priorities across countries, particularly with regard to industrializing and industrialized countries; developing weighted priorities based on environmental risk; and balancing the demand for simple robust metrics with an appreciation of their interpretive limitations. References American Automobile Manufacturers Association (AAMA). 1994. AAMA Motor Vehicle Facts and Figures. Detroit: AAMA. American Automobile Manufacturers Association (AAMA). 1997. Motor Vehicle Facts and Figures. Detroit: AAMA. American Automobile Manufacturers Association (AAMA). 1998. Environmental Responsibility: Progress Measurement. Available online at http://www.aama.com/environment/progress.html. [Jan. 13, 1999] Deutsch, C. 1998. For Wall Street, increasing evidence that green begets green. New York Times. July 19, Section 3, p. 7. Fischer, K., and J. Schot. 1993. Environmental Strategies for Industry: International Perspectives on Research Needs and Policy Implications. Washington, D.C.: Island Press. Ford Motor Company. 1997. Environmental Annual Report, Ford Motor Company. Detroit: Ford Motor Company. Ford Motor Company. 1998. Design for Environment. Available online at http://www.ford.com/ corporate-info/environment/research/design4enviro.html. [August 11, 1998] France, W., and V. Thomas. 1994. Industrial ecology in the manufacturing of consumer products. Pp. 339–348 in Industrial Ecology and Global Change, R. Socolow, C. Andrews, F. Berkhout, and V. Thomas, eds. London: Cambridge University Press. General Motors. 1997. The Right Road. General Motors Environmental Health and Safety Report. Detroit: General Motors Company. Graedel, T.E., and B.R. Allenby. 1997. Industrial Ecology and the Automobile. Upper Saddle River, N.J.: Prentice Hall. Horkeby, I. 1997. Environmental prioritization. Pp. 124–131 in The Industrial Green Game, D.J. Richards, ed. Washington, D.C.: National Academy Press. Kainz, R.J., M.H. Prokopyshen, and S.A.Yester. 1996. Life cycle management at Chrysler. Pollution Prevention Review 6:71–83. Lee, R., M. Prokopyshen, and S. Farrington. 1997. Life cycle management case study of an instrument panel. Paper No. 971158 in the Proceedings of the Total Life Cycle Conference, Society of Automotive Engineers, April 6. Michigan Department of Environmental Quality. 1998a. Pollution Prevention in the Auto Industry. Available online at http://www.deq.state.mi.state/p2sect/auto. [August 11, 1998] Michigan Department of Environmental Quality. 1998b. Process Change to Eliminate the Use of Trichloroethylene. Available online at http://www.deq.state.mi.us/ead/fact/auto/ford.html#PROCESS CHANGE TO ELIMINATE THE USE OF. [August 11, 1998] Michigan Department of Environmental Quality. 1998c. Chrysler Corporation Underhood Mercury Switch Life Cycle Management Study. Available online at http://www.deq.state.mi.us/ead/ fact/auto/chrysler.html. [August 11, 1998] Michigan Department of Environmental Quality. 1998d. Turning Off the Water Saves Millions of Gallons. Available online at http://www.deq.state.mi.us/ead/fact/auto/gm.html. [August 11, 1998]

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--> Michigan Department of Environmental Quality. 1998e. Kokomo Transmission Plan Reuses Plastic. Available online at http://www.deq.state.mi.us/ead/fact/auto/chrysler.html. [August 11, 1998] National Research Council. 1992. Automotive Fuel Economy: How Far Should We Go? Washington, D.C.: National Academy Press. United States Automotive Materials Partnership, Life-Cycle Assessment Special Topics Group. 1997. Life-Cycle Inventory Analysis of a Generic Vehicle. Detroit: Automobile Industry SubGroup. United States Department of Commerce (USDOC). 1995. Inventions Needed for PNGV. Washington, D.C.: USDOC. United States Environmental Protection Agency (USEPA). 1999. Superfund: Cleaning Up the Nation's Hazardous Waste Sites. Available online at http://www.epa.gov/superfund/index.htm. [February 12, 1999]