1. What Auto Financing Sources and Auto Dealers Are Doing to Become Lean and Green Facilitated by: Sponsored by: January 21, 2009 This workshop was conducted in conjunction with the American Financial Services Association 13 th Annual Vehicle Finance Conference

2. Workshop Panelists and Sponsor Dealer Operations Andy Koblenz, VP, General Counsel, NADA Doug Greenhaus, Director, Environment, Health and Safety Dealer/F&I 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.

3. Workshop Topics and Discussions The workshop topics did not include: The global warming debate Review of types of or impact of greenhouse gases Green vehicle comparison The workshop topics included: Overview of global green activities Corporate and consumer attitudes Auto dealer and financing lean and green processes 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 company’s 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. This workshop, conducted at the American Financial Services Association (AFSA) 13 th 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.

4. 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. Becoming Lean and Green

5. The Many Questions??? 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? 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? Many more questions come to mind when talking about becoming “lean and green.” What are a company’s 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?

6. Climate Change Activities

7. The Driving Factors 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 The factors driving companies to consider green initiatives focus mainly on:

8. Carbon (CO 2 ) Emissions Carbon Neutral Footprint Carbon Capture and Storage (CCS) Carbon Offsets Carbon Caps and Trading Carbon Productivity The “Green” Language Greenhouse Effect Greenhouse Gases (GHG) Greenhouse Reduction Greenhouse Intensity Credits Certified Emission Reduction (CER) Verified Emission Reductions (VER) Renewable Energy Credit (REC) Clean Development Mechanism (CDM) There is much research that is debated on the following areas: Source: Carbon Dioxide Information Analysis Center Note: Additional terms and topics can be found at: http://www.nada.org/green/getinvolved/glossary/default.htm

9. 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 Climate Change Bodies and Agreements 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 There are a number of organizations that are focused on climate change. 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) While there are too many agreements, standards and initiatives around the world to name, there are several that are most often noted.

10. 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.

11. State Response 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 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.

12. Evolving Corporate Attitudes 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 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: 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. Balancing the growing fear of competitive and reputation risk

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

14. Changing Consumer Attitudes More overall trust with corporations showing environmental responsibility Greater expectations of corporate efforts expanding their green products and initiatives 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: 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.

15. Auto Industry Response

16. The Green in Auto Production and Sales Fuel types and efficiency levels Battery power and storage Building and infrastructure Plant efficiency Vendor management Carbon offsets With vehicle manufacturing, the focus has been on… Dealership showroom and servicing facilities – existing and new construction Vehicle maintenance Utility usage Waste use programs With auto dealers, the focus has been on…

17. 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.

18. NADA Green Success: The nation’s new-car and truck dealers have spent about $1 billion to make their dealerships more eco-friendly. More than 800 dealers are members of EPA’s Energy Star Small Business Network, pledging to reduce their energy use by at least 10 percent. The U.S. Green Building Council’s 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 today’s standards. The NADA Green

19. Green Media in Auto 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 And, there are many more… A number of the mainstream automotive magazines and websites have also gone “green.”

20. “Green” Auto Financing 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) The green in financing of vehicles has been minimal to date. 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.

21. Some of these companies are shown below: “Green” Products for Auto Sales/Financing Electronic processing, imaging and storage of documents Electronic consumer communications and marketing data Vehicle maintenance Market and industry research 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:

22. 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.

23. Lean and Green Game Plan

24. Today’s Business Goals 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 Business goals have not changed much over the years with the keys ones being… 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

25. Strategizing and Implementing Green Initiatives Source: www.ceres.org A Green Framework for Action includes: Board oversight Management execution Public disclosure Emissions accounting Strategic planning

26. Strategizing and Implementing Green Initiatives 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 Final thoughts on how to be “Lean and Green”:

27. For auto financing sources and auto dealers, specific lean and green (or clean) initiatives to be considered include: Strategizing and Implementing Green Initiatives F&I Operations Servicing Operations Account Originations Account Servicing LEED certified facilities Reduced or alternative energy use Efficient water, utility and waste management eProcessing of documents Electronic communications with business partners and customers Green data use and storage Improved reporting tools Flexible hours/ telecommuting Green requirements for suppliers Franchised Auto Dealers Auto Financing Sources

28. Additional Resources 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@connectionsinsights.com NADA Green Campaign (http://www.nada.org/green) NADA Energy Star Partnership (http://www.nada.org/energystar/) 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_briefing_green.pdf) UN Environment Programme Finance Initiative Green Financial Products and Services (http://www.unepfi.org/fileadmin/documents/greenprods_01.pdf) The World Resource Institute (www.wri.org) USCAP Blueprint for Legislative Action (www.us-cap.org/blueprint) Additional information can be found at: