Environmental Pragmatism The Key to Moving Forward Bob

Environmental Pragmatism: The Key to “Moving Forward” Bob Wade Corporate Manager Environmental, Hazmat & Safety

Presentation Overview 1. Continuing regulatory, political and public pressures to reduce emissions and carbon footprint 2. Toyota’s environmental program – going beyond compliance 3. How to “Move Forward” and achieve results in today’s reality

Public Opinion Context Continuing public concern and pressure to address global climate change. . . despite lack of major progress at Copenhagen.

Personal Stakes are High

Regulatory Context • Continued focus at the Federal and state levels on addressing emissions and GHG reductions • EPA decision to grant California waiver for GHG emission standards for motor vehicles. . . soon 2016 and beyond • Possible Federal climate change legislation • CARB diesel emission reduction programs, spanning: – On-road vehicles (trucks, buses, etc. ) – Off-road vehicles and equipment (locomotives, tractors, cargo handling equipment, etc. ) – Marine vessels (harbor craft, ocean vessels, shore power) – Stationary engines & portable equipment

Toyota Environmental Program Toyota’s Global Earth Charter TMS Environmental Policy Toyota’s Global 5 Year Environmental Action Plan TMS Environmental Action Plan North American Environmental Report Global Environmental Report

TMS Environmental Action Plan 1. Energy & Climate Change 2. Recycling & Reduce Resources • Set goals & targets • Report annual results 2009 NA Report Results 3. Substances of Concern • Exceeded CAFE 4. Air Quality • 25% less energy use - TMS 5. Environmental Management • 90% recycling rate at TLS 6. Cooperation with Society • Logistics GHG reduction

Today’s Challenge How do we achieve further environmental gains in today’s regulatory and economic climate - and – at the same time, avoid undue burden and cost impacts on shipping? Answer “Environmental Pragmatism”

“Environmental Pragmatism” Recipe “Short-Term Small” + “Long-Term Large” + Common Sense

“Short-Term Small” • Identify small investments and process changes that have short-term ROI and achieve environmental goals • String them together to maximize return

Example #1 – Fuel Efficiency Initiative A cross-affiliate team from service parts, completed vehicle logistics and manufacturing parts logistics developed some 19 separate initiatives to reduce fuel costs Annualized Savings = $2. 76 M + GHG & Emissions Reductions Toyota Transport TQPE TEMA • Post MPG • 18 trailers w/skirts • Governed Speed • Driver Incentive (Post MPG) • Governed Speed • 2 trailers w/skirts • 2 trailers w/Nose cone • MPG target for fuel surcharge calculation (6. 3 mpg 6. 53 in FY 10) $274, 658 $ 188, 764 $2. 3 M

Toyota Transport - Governed Speed reduction of 5 mph 68 mph to 63 mph Unit cost: $15 – labor Launch date: July 08 MPG gain: 2. 97% ROI: < 1 week Savings/Yr. : $1, 258/truck 44 trucks: $55, 352/yr.

Service Parts - Driver Incentive Program. 5 mpg Increase Unit cost: $7, 000 max Launch date: April 09 MPG gain: . 575 mpg Q 2 ROI: 2 weeks Savings/Yr. : $138 K/yr.

Example #2 – Service Parts Truck Efficiency Kaizen • Through route kaizen & increased cube efficiency, TMS reduced miles traveled to deliver service parts and accessories by 2. 5 M miles over the previous year.

“Long-Term Large” • Patient investment – facilities, equipment and process changes • Longer-term plans and expectations • No instant ROI – but perhaps greater longterm return

Energy Use – U. S. Sales & Distribution 25% Energy Savings

“Long-Term Large” NAPCC Rooftop Solar

“Long-Term Large” Benefits NAPCC Rooftop Solar • 2. 3 megawatt solar roof array – second largest in North America • No upfront capital costs • Generates 58% of NAPCC electricity requirements • Prevents 2. 4 million pounds of CO 2 annually • Annual utility cost savings of $360 K annually

Application to Port Operations • Led by the Ports of LA and Long Beach – greater emphasis on environment • Some requirements – like cold-ironing, stack sock, vessel retrofits – are very costly and sometimes impractical • There may well be better, more practical and more cost-effective solutions!!

Conclusion • These are challenging times on the economic and regulatory fronts • The key to “Moving Forward” in achieving environmental goals without creating undue financial burdens on shipping will require. . . “Environmental Pragmatism” “Short-Term Small” + “Long-Term Large” + Common Sense