1. M O T O R C O A C H I N D U S T R I E S Climate Change Initiatives

2. Percy Phillips Director of Engineering

3. Privileged and Confidential 3 of 26 MCI and Climate Change Overview: n 1. About Motor Coach Industries n 2. Transportation and Climate Change n 3. Traffic and Bus Energy and Emissions n 4. MCI Climate Improvement Opportunities: –Compressed (or Liquified) Natural Gas fueled commuter bus –Hybrid powered commuter bus –Low Emission Auxiliary Power Units –Driver Training for Energy Use Optimization. n 5. Government Climate Improvement Opportunities: –Provide R&D assistance for low emission bus projects –Increase bus ridership –Provide Tax Incentives and/or Subsidies to support low emission bus deployment and ridership.

4. Privileged and Confidential 4 of 26 MCI: Who We Are n MCI designs, develops, manufactures and markets intercity coaches for revenue service and personal use. n MCI is the largest North American coach manufacturer, with plants and offices in Manitoba, Quebec, North Dakota, New Mexico, California, Texas, New Jersey,Ohio, Kentucky, Illinois, and Mexico. n In Manitoba alone, we build almost 1,400 coaches per year, with almost 2,000 employees. n Some of the major subcontractors supporting MCI in Manitoba include: Vansco, Acrylon, Franklin, EH Price, Custom Steel, Sigma, Mackow, Stormtite, Industrial Rubber, Thor, Dupont, and Atlas Alloys.

5. Privileged and Confidential 5 of 26 Climate Change n Scientific evidence strongly suggests that the rapid buildup of greenhouse gases in the atmosphere is raising the earth's temperature and changing the earth's climate with many potentially serious consequences.

6. Privileged and Confidential 6 of 26 Greenhouse Gas Emissions Canada is number 3 in the world for Greenhouse Gas Emissions at 6.0 MMTCE (Million Metric Tons of Carbon Equivalent) per capita.

7. Privileged and Confidential 7 of 26 Transportation’s Contribution to Greenhouse Gases: The transportation sector is the second largest contributor to greenhouse gases.

8. Privileged and Confidential 8 of 26 Greenhouse Gases from Transportation: n Primary Greenhouse Gases: –Carbon Dioxide, CO 2 –Nitrous Oxide, N 2 O –Methane, CH 4 n Indirect Greenhouse Gases: –Nitrogen Oxides, NO x –Carbon Monoxide, CO

9. Privileged and Confidential 9 of 26 CO 2 Production

10. Privileged and Confidential 10 of 26 Nitrogen Oxide Emissions n While total N 2 O emissions are much lower than CO 2 emissions, N 2 O is approximately 310 times more powerful than CO 2 at trapping heat in the atmosphere (IPCC 1996). n Mobile sources are the second largest producer of N 2 O.

11. Privileged and Confidential 11 of 26 Recent Trends n The recent trends show a general increase in total greenhouse gas emissions.

12. Privileged and Confidential 12 of 26 Bus Emissions n Total bus and Heavy Duty Truck emissions have increased.

13. Privileged and Confidential 13 of 26 Traffic n Average MCI coach has seating for 56 passengers n Assuming some existing car pooling, one coach could easily take 40 cars off the road during rush hour.

14. Privileged and Confidential 14 of 26 Traffic Energy and Emissions n Year 2000 average Canadian car fuel economy was 24.2 miles per U.S. gallon, or.0412 gallons per mile per car which generates.3605 kg CO 2 per mile per car. n 40 passenger cars would release 14.42 kg CO 2 per mile. n Typical MCI intercity coach fuel economy is 6.7 mpg, or.149 gallons per mile per coach which generates 1.49 kg CO 2 per mile per bus. n If one coach could replace 40 cars during rush hour commutes, it would generate 11 times less CO 2, and save 1.5 gallons per mile. n However, for the last 30 years, while intercity bus miles traveled in Canada has not shown any trend, the number of passengers has declined. In the U.S., this trend has not been demonstrated. Therefore, bus usage has become less optimized in Canada.

15. Privileged and Confidential 15 of 26 Intercity Bus Usage in Canada

16. Privileged and Confidential 16 of 26 Canada vs. U.S. Bus Usage

17. Privileged and Confidential 17 of 26 Canadian Bus Usage n If Canadian Bus Usage could be returned to the 1970 level, we could take over 20 Million car trips off the Canadian roads, and save at least 387 kg of CO 2 per mile traveled. n Less traffic congestion would also further reduce the emissions generated by the remaining vehicles on the street, through smoother flowing traffic.

18. Privileged and Confidential 18 of 26 MCI Climate Change Initiatives/Opportunities: Natural Gas Fueled Engines: n Compared to current Diesel Engines: –50% less NO x emissions –up to 25% less CO 2 –significant reductions in other toxic emissions

19. Privileged and Confidential 19 of 26 MCI Climate Change Initiatives/Opportunities: n MCI CNG fueled Commuter bus is currently offered. n Future opportunities for LNG Commuter Bus and CNG/LNG short haul Tour Coach. n Challenges: –Current CNG/LNG DDC S60 engine carries a tremendous cost penalty. The S60G engine is currently the only CNG/LNG engine available in the power range required for our bus/coach size/weight. –Low cost, light weight fuel tanks. –R & D costs for MCI to develop LNG Commuter Coach ~ $2 Million (US). n Opportunities: –possible alternative CNG/LNG engine development cooperative program with Westport Innovations of Vancouver, B.C.

20. Privileged and Confidential 20 of 26 MCI Climate Change Initiatives/Opportunities: Diesel fueled Hybrid-Electric Powered: n Compared to current conventional Diesel Powertrains: –50% less NO x emissions* –50% less CO 2 emissions* –significant reductions in other toxic emissions * over CBD-14 standard driving cycle

21. Privileged and Confidential 21 of 26 MCI Climate Change Initiatives/Opportunities: n MCI does not currently offer a Diesel Hybrid Electric powertrain bus. n Future sales opportunities for Hybrid- Electric Commuter Buses. n Challenges: –R & D costs for MCI to develop a Hybrid Powered Commuter Coach ~ $2 Million (US) –Cost of hybrid components are still high, therefore the hybrid bus will also carry a significant cost penalty. n Opportunities: –MCI currently has an opportunity with Allison Electric Drives to co- develop an advanced Parallel Hybrid-Electric commuter bus.

22. Privileged and Confidential 22 of 26 MCI Climate Change Initiatives/Opportunities: Low Emission Auxiliary Power Units (APU): n Current Commuter Buses and Coaches often spend a great deal of time idling, to maintain interior comfort levels (heat in winter, A/C in summer), and electrical accessories. n A typical Coach or Commuter Bus spends 40% of it’s time with the engine at idle. This corresponds to about 2000 gallons of fuel, and generates approximately 20,000 kg of CO 2, per year per bus. With over 3000 coaches in Canada alone, this corresponds to 60 Million kg of CO 2 per year. For all of North America, 880 Million kg of CO 2 are generated by coaches idling. n A low emission, high efficiency APU could generate electricity to run the bus/coach “hotel loads”, and allow the main engine to shut down, thereby conserving fuel and reducing emissions.

23. Privileged and Confidential 23 of 26 MCI Climate Change Initiatives/Opportunities: n MCI does not currently offer a low emission APU. n Future opportunities to use small Fuel Cells, MicroTurbines, or other low emission, high efficiency auxiliary power sources. n Challenges: –MCI does not currently have the budget (or necessary expertise) to develop the APU systems. –Cost of Fuel Cells are still high, therefore the APU may also carry a significant cost penalty. n Opportunities: –Canada is the leader in Fuel Cell technology, with several companies developing different fuel cell systems.

24. Privileged and Confidential 24 of 26 MCI Climate Change Initiatives/Opportunities: Driver and Mechanic Training: n Current and future Bus and Coach drivers and service personnel can be trained to: –minimize bus idling times (park in shaded areas in summer, etc.) –drive smoothly to conserve energy and reduce emissions –maintain the bus/coach in a “clean” and efficient state of tune (brakes aren’t dragging, etc.). n However, MCI currently does not have the budget to expand training programs.

25. Privileged and Confidential 25 of 26 Summary: Opportunities for MCI to help reduce climate change: n CNG/LNG powered buses/coaches n Hybrid-Electric powered buses n High Efficiency, Low Emission APUs to reduce idle time n Driver and Maintenance Training Programs

26. Privileged and Confidential 26 of 26 Summary: Opportunities for the Canadian and Manitoba Governments: n provide R&D assistance for the “green” technology bus projects, and training initiatives. n increase bus ridership in Canada. n offset “green” technology bus costs with Tax Incentives or Subsidies for bus/coach operators: –~ $50,000 (US) for each Hybrid bus –~ $80,000 (US) for each CNG/LNG bus –~ $30,000 (US) for each APU equipped bus –reduce fuel taxes on ultra low sulfur Diesel fuel, CNG and other possible “clean” fuels.