What Auto Financing Sources and Auto Dealers Are Doing to Become Lean and Green

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What Auto Financing Sources and Auto Dealers Are
Doing to Become Lean and Green
January 21, 2009
Sponsored by
Facilitated by
This workshop was conducted in conjunction with
the American Financial Services Association 13th
Annual Vehicle Finance Conference
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Workshop Panelists and Sponsor
Dealer Operations Andy Koblenz, VP, General
Counsel, NADA Doug Greenhaus, Director,
Environment, Health and Safety Dealer/FI Gary
Lorenz, CEO, Climate Clean Originations Hugh
Abernethy, VP, National Accounts,
DealerTrack Servicing Pete Kenning, CEO, Cedar
Document Technologies Facilitator Marguerite
Watanabe, President, Connections Insights
CEDAR Document Technologies has been a leading
provider of technologies and services for the
composition, enhancement, delivery, archival and
response management of both print and interactive
electronic documents. Cedar has developed and
deployed numerous document innovations for some
of the largest companies in the world including
Citizens Property Insurance Corp., Ford Motor
Company, Reliance Standard Insurance, Equifax,
First Data, Volvo, and others.
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Workshop Topics and Discussions
This workshop, conducted at the American
Financial Services Association (AFSA) 13th Annual
Vehicle Finance Conference, focused on ways in
which auto financing sources and auto dealers can
streamline their operations making them more
efficient while simultaneously implementing
environmentally friendly processes and programs.
In discussion groups throughout the session, the
attendees explored ways in which auto financing
sources and dealers are currently or thinking
about how they can implement leaner, more
efficient and environmentally friendly processes
or business solutions without compromising the
companys value proposition or competitiveness.
Moreover, which each process and solution, the
ability to reduce costs and increase revenue were
also discussed. The highlights of these
discussions have been incorporated into this
summary.
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Becoming Lean and Green
Group Consensus The sessions focused on a key
question Is it possible to be lean and green,
especially with the enormous pressures facing the
auto and auto financing industries? It was agreed
that the ability to concentrate efforts on the
environment would be a challenge. However, it
was recognized that it is possible and desirable
to implement lean and green initiatives in order
to reduce costs and show corporate responsibility.
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The Many Questions???
Many more questions come to mind when talking
about becoming lean and green.
How much of this global warming is really
real? How do I find out what is fact and what is
fiction? What will it get us? Revenue? New
customers? Market share? Competitive advantage?
Will there be a reprieve from regulation? Or,
more regulation?
What is being required of our industry versus
others? How much is handled by federal? And,
how much by state requirements? What do we need
to do versus should do today? Tomorrow? At
all? Can our company do enough to really make a
difference?
What are a companys options? What is the right
way to implement green programs without appearing
self-serving? Do customers want to be aligned
with the recognized green companies? What will it
cost? How is it all being measured?
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Climate Change Activities
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The Driving Factors
The factors driving companies to consider green
initiatives focus mainly on

• Multinational and unilateral government policies
  and agreements
• Impact of energy consumption and availability on
  environmental and global security
• Growing interdependence within the world market
• Shifts in market reputation and competitiveness
  influencers

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The Green Language
There is much research that is debated on the
following areas

• Greenhouse Effect
• Greenhouse Gases (GHG)
• Greenhouse Reduction
• Greenhouse Intensity

• Carbon (CO2) Emissions
• Carbon Neutral Footprint
• Carbon Capture and Storage (CCS)
• Carbon Offsets
• Carbon Caps and Trading
• Carbon Productivity

• Credits
• Certified Emission Reduction (CER)
• Verified Emission Reductions (VER)
• Renewable Energy Credit (REC)
• Clean Development Mechanism (CDM)

Note Additional terms and topics can be found
at http//www.nada.org/green/getinvolved/glossar
y/default.htm
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Climate Change Bodies and Agreements
There are a number of organizations that are
focused on climate change.

• United Nations Environmental Programme
• World Meteorological Organization
• The Carbon Dioxide Information Analysis within
  the Department of Energy (formed in 1982)
• Intergovernmental Panel on Climate Change
  (created in 1988)
• United Nations Framework Convention on Climate
  Change (held in 1992)
• Asia-Pacific Partnership on Clean Development and
  Climate (2005)
• U.S. Green Building Council

While there are too many agreements, standards
and initiatives around the world to name, there
are several that are most often noted.

• Kyoto Protocol
• Ratified by 175 parties
• Went into force in 2005, expires in 2012
• European Union Emissions Trading Scheme (EU ETS)
• Leadership in Energy Environmental Design (LEED)

• The United States
• Did not ratify the Kyoto Protocol
• Did ratify the UNFCC
• Formed the U.S. Climate Action Partnership
  Blueprint for Legislative Action (1/15/09)
• May see the introduction of a Green Economy
  stimulus package by President Obama

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Climate Change Legislation
There is much discussion about implementing
mandatory standards, but no clear conclusions
have come to the forefront. And, with the
current economic crisis, there may be even
greater care taken in determining the costs and
benefits of any legislation. One comparison (see
below) prepared by the World Resources Institute
(WRI), an environmental think tank founded in
1982 based in Washington, D.C., summarizes their
analysis of the impact of various legislative
actions being proposed in Congress.
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State Response
Several states and groups of states have
implemented mandatory regulations of greenhouse
gases. Their regulations have been mainly
confined to power generation and motor vehicles.

• Regional Greenhouse Gas Initiative (RGGI)
• 10 Northeast States - begins 2009
• Cap-and-trade program applies to electric
  generation
• California AB 32 and Western Climate Initiative
• Seven participating states and five observer
  states
• Florida Executive Order (80 reduction by 2050)
• New Jersey Legislation (80 reduction by 2050)
• Midwest Greenhouse Gas Reduction Accord
• Five participating states and four observer
  states
• State Renewable Portfolio Standards
• 24 states with renewable standards
• 6 additional states with renewable goals and
  incentives

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Evolving Corporate Attitudes
While there is still a gap between U.S.
corporations and their global counterparts, some
company leaders are starting to change their
attitudes toward global sustainability
recognizing the need for

• Market leadership
• Focus on clean, green and lean as a means to cost
  savings as well as a market advantage
• Going beyond commuting and recycling
• Understanding consumer demand for environmentally
  friendly products and services

• Balancing the growing fear of competitive and
  reputation risk

• Group Discussion Highlights
• Companies are willing to do good, but only if
  convenient for them.
• Companies can do more damage with false green
  initiatives than by choosing to do nothing.
• In the current economic crisis, companies may not
  have the time and energy to focus on their green
  initiatives.
• Corporate leaders need to take the time become
  more educated on their options before sincere
  action can be taken.
• Corporations also must be willing to educate
  their employees.
• Standards should be set for companies to use
  along with case studies to provide further
  guidance.

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Green Financial Institutions
Among financial services institutions, a few
larger banks stand out as leaders in seeking to
reduce their carbon emissions.

• Product development
• Credit Cards
• Insurance
• Investment in/financing of green projects
• Purchase of carbon offsets

A few smaller financial institutions have also
made a difference.

• Vancouver City Savings Credit Union reduced
  energy use, staff travel, paper consumption and
  waste since 1998 (has saved 2 million in energy
  costs)
• First National of Nebraska Built data center
  powered completely by fuel cell technology in
  1999 (has saved 75 million by avoiding a back-up
  center)

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Changing Consumer Attitudes
While there is still a gap between consumers,
especially among the younger generations, and
corporate executives, this gap is shrinking.
Consumers are beginning to have

• More overall trust with corporations showing
  environmental responsibility
• Greater expectations of corporate efforts
  expanding their green products and initiatives

• Group Discussion Highlights
• Awareness is growing with consumers, but
  consumers still need to be educated and possibly
  incentivized.
• Consumers, like corporations, are also willing
  to do good, but only if convenient for them.

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Auto Industry Response
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The Green in Auto Production and Sales
With vehicle manufacturing, the focus has been on

• Fuel types and efficiency levels
• Battery power and storage
• Building and infrastructure
• Plant efficiency
• Vendor management
• Carbon offsets

With auto dealers, the focus has been on

• Dealership showroom and servicing facilities
  existing and new construction
• Vehicle maintenance
• Utility usage
• Waste use programs

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The NADA Green

• NADA has focused its Lean and Green efforts on
• Energy Stewardship Initiative offers data, tools,
  and strategies to help dealerships implement a
  variety of cost-effective retrofit and new
  construction strategies involving
  energy-efficient lighting, climate controls,
  equipment, and building design as well as
  improved energy practices and technologies,
  building on a jointly developed Dealer Guide to
  Energy Star Putting Energy into Profits.
• NADA Green Checkup Campaign with the theme A
  New Car Is a Green Car designed to raise
  awareness of how the auto industry is increasing
  fuel economy through innovation and new
  technologies.
• Green Survey for dealers to assess their green
  initiatives
• Green Driving USA for consumers, a new initiative
  to raise public awareness of ways to save money
  on gas and, at the same time, cut greenhouse gas
  emissions.

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The NADA Green

• NADA Green Success
• The nations new-car and truck dealers have spent
  about 1 billion to make their dealerships more
  eco-friendly.
• More than 800 dealers are members of EPAs Energy
  Star Small Business Network, pledging to reduce
  their energy use by at least 10 percent.
• The U.S. Green Building Councils Leadership in
  Energy and Environmental Design (LEED) program
  has certified two dealers, and two dozen others
  are nearing certification.
• Dealers support the new Corporate Average Fuel
  Economy (CAFE) law calling for vehicles to
  achieve 35 mpg by 2020 a 40 increase over
  todays standards.

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Green Media in Auto
A number of the mainstream automotive magazines
and websites have also gone green.

• Automotive News Green Cars
• Edmunds Green Car Advisor/Green Car Guide
• Kelley Blue Book Green
• Yahoo! Autos Green Center
• AutoTrader Green Magazine
• Road Travel Magazine Planet Driven Section
• MSN Autos Green Central
• autobloggreen.com

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Green Auto Financing
The green in financing of vehicles has been
minimal to date.

• Some auto financing sources have implemented
  eProcessing in the originations areas and
  eTitling in the
• Some carbon offset purchases have been made in
  Europe by auto financing sources
• In ower interest rate for lower GHG rated cars
  (e.g., Seattle Metropolitan Credit Union offering
  reduction in rate for hybrid vehicles and for
  those getting 25 mpg or greater)

• Group Discussion Highlights
• Consumers reacted quickly to the higher gas
  prices by looking more closely at smaller cars
  and hybrid vehicles however, as soon as gas
  prices fell, sales of larger trucks and SUVs went
  back up.
• As consumers buy a greater number of hybrid
  vehicles, auto financing sources will need to
  learn how to calculate their residual values as
  well as the potential credit losses for the type
  of consumer buying these vehicles.
• It is unknown if manufacturers and their captives
  plan to offer special financing offers on their
  green vehicles.

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Green Products for Auto Sales/Financing
A number of providers of services and products to
auto financing captives, banks and companies
along with their dealer customers have initiated
some activities impacting the environment. Some
of these companies are themselves involved in
green initiatives. Others provide services that
allow their clients to offer environmentally
friendly products. And, others provide industry
intelligence. Most focus on one or more of the
following areas

• Electronic processing, imaging and storage of
  documents
• Electronic consumer communications and marketing
  data
• Vehicle maintenance
• Market and industry research

Some of these companies are shown below
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The Green Auto Consumer

• Group Discussion Highlights
• Consumers reacted quickly to the higher gas
  prices by looking more closely at smaller cars
  and hybrid vehicles however, as soon as gas
  prices fell, sales of larger trucks and SUVs went
  back up.
• As consumers buy a greater number of hybrid
  vehicles, auto financing sources will need to
  learn how to calculate their residual values as
  well as the potential credit losses for the type
  of consumer buying these vehicles.
• It is unknown if manufacturers and their captives
  plan to offer special financing offers on their
  green vehicles.

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Lean and Green Game Plan
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Todays Business Goals
Business goals have not changed much over the
years with the keys ones being

• Reduce costs (at all cost!)
• Meet regulatory requirements
• Improve operational efficiency
• Increase customer satisfaction
• Increase profit margin, etc.

• New goals have been added
• Accept and act upon corporate and social
  responsibility
• Support global sustainability

However, when evaluating green and social
responsibility initiatives, other internal
projects and priorities tend to be the
competitor.

• Risk Analysis Tools
• Company Restructuring
• Compliance
• Product Development
• Employee Taining
• System Upgrades
• Marketing and Customer Retention

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Strategizing and Implementing Green Initiatives
A Green Framework for Action includes

• Board oversight
• Management execution
• Public disclosure
• Emissions accounting
• Strategic planning

Source www.ceres.org
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Strategizing and Implementing Green Initiatives
Final thoughts on how to be Lean and Green

• Think lean, green and clean
• Take advantage of the green activities to become
  more efficient and create customer value
• Understand how your investors and customers value
  green
• Decide how important it is to educate your
  customer base
• Make it convenient for all to understand and
  implement investors, employees, customers, the
  media, alike
• Consider requirements for your vendors and
  strategic business partners
• Seriously understand the costs and benefits of
  the public relations aspect of any program
• Create a comprehensive (i.e., not one off
  strategy)
• Have high-level management support for all
  efforts
• Plan to measure success

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Strategizing and Implementing Green Initiatives
For auto financing sources and auto dealers,
specific lean and green (or clean) initiatives to
be considered include
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If you have any questions on the workshop or
would like to contact any of the panelists,
please contact Marguerite Watanabe President,
Connections Insights, LLC 678-520-3385 marguerite_at_
connectionsinsights.com
Additional Resources
Additional information can be found at
NADA Green Campaign (http//www.nada.org/green) NA
DA Energy Star Partnership (http//www.nada.org/en
ergystar/) CERES (Investors and
Environmentalists for Sustainable Prosperity)
(www.ceres.org) Carbon Disclosure Project
(www.cdproject.net) UN Environment Programme
Finance Initiative CEO Briefing
(http//www.unepfi.org/fileadmin/documents/ceo_bri
efing_green.pdf) UN Environment Programme Finance
Initiative Green Financial Products and Services
(http//www.unepfi.org/fileadmin/documents/greenpr
ods_01.pdf) The World Resource Institute
(www.wri.org) USCAP Blueprint for Legislative
Action (www.us-cap.org/blueprint)