Ford Otosan Commercial Vehicles

Location:

Turkey

Project number:

48889

Business sector:

Manufacturing and Services

Notice type:

Private

Environmental category:

B

Approval date:

22 Mar 2017

Status:

Disbursing

PSD disclosed:

02 May 2017

Translated version of this PSD: Turkish

Project Description

€150 million long-term loan to Ford Otomotiv Sanayi A.S. to finance the investment programme for the upgrade of Ford Otosan's Transit commercial vehicles as part of its medium term investment programme at its plant in Kocaeli, Turkey.

Project Objectives

The project provides financing for the mid-cycle facelift of Ford Otosan's Transit model commercial vehicles at the Kocaeli manufacturing base, helps create an ecosystem of skilled and certified workforce in the automotive industry and contributes to the Bank's ongoing dialogue with the Turkish authorities on inclusion, the opening up of economic opportunities to previously under-served social groups.

Transition Impact

The project is expected to achieve a strong transition impact in Turkey in relation to youth economic inclusion in the automotive industry, particularly through (i) transfer and dispersion of skills via improved technical and vocational education and provisioning scheme; and (ii) setting standards for corporate governance and business conduct by contributing towards the Bank's ongoing inclusion policy dialogue initiative in Turkey that facilitates a direct engagement between the private sector and Turkish education authorities to improve technical and vocational skills standards in the country in line with employers' needs.

Client Information

FORD OTOMOTIV SANAYI AS

Ford Otosan is incorporated in Turkey for the manufacturing and selling of motor vehicles and parts.

The company operates as a joint venture between Ford Motor Company and Koc Holding, with 41 per cent equity stake each; the rest of the shares are listed on Borsa Istanbul.

Koc Holding is the leading industrial conglomerate in Turkey primarily focusing on the energy, automotive, consumer durable goods and finance industries.

Ford Motor Company is one of the leading automotive manufacturers and distributors in the world that selling vehicles across six continents.

EBRD Finance Summary

EUR 150,000,000.00

Total Project Cost

EUR 440,000,000.00

Environmental and Social Summary

Categorised B (2014 ESP). The Environmental and Social Due Diligence (ESDD) has shown that the environmental and social (E&S) impacts associated with the project are site specific, and readily identified and addressed through established mitigation measures. The company operates world class manufacturing facilities and is already largely compliant with the Performance Requirements (PR) through implementation of corporate management systems and progress against existing Environmental and Social Action Plan (ESAP). A comprehensive, independent environment, health and safety and labour due diligence was conducted for this new project, in combination with visits from Bank staff, and an updated ESAP has been developed to structure the project and existing operations fully in line with the PRs.

The ESDD included a site visit to the company's manufacturing and assembly bases in Kocaeli (Golcuk and Yenikoy factories), interviews with EHS and HR management teams, interviews with workers, meetings with the trade union representatives, and a document review and follow up calls with the Company representatives.

The ESDD showed that the company has well-developed EHS and HR systems, and the capacity to fully implement the Bank's PRs. Environmental and occupational health and safety issues are managed through an integrated management system (IMS) certified to ISO 14001; ISO 14064 Greenhouse Gases Quantification and Verification System Standard; ISO 50001 Energy Management System Standard; ISO 9001; and OHSAS 18001 standards at all operations. The necessary resources and capacities are in place to implement the IMS. Environmental targets are transferred into individual business targets through a scorecard practice, and the results achieved influence the performance based remuneration of employees of all levels. The primary targets are adopted in compliance with the Ford Global Environmental Operating System EOS (which has specific KPIs on reduction of energy consumption, water consumption, eliminated waste, VOC emission). Also, an Environmental Compliance Index (ECI) scorecard is monitored at the group level.

Ford Otosan employs a total staff of approximately 10,500 people, the majority of which are members of trade unions. The company's Code of Conduct complies with the United Nations Global Compact, of which Ford Motor Company and Koc Holding are signatories. The company has initiated an Equal Opportunities programme which aims to prevent gender discrimination and promote equal opportunities for women in business life.

The Bank reviewed labour issues in detail at the company, including identification and management of labour issues in the supply chain; their communication with workers and the unions; and how grievances and disputes are managed on day to day basis. According to the workers interviewed as part of ESDD, the company has taken measures to improve working conditions and relationships with the  stakeholders including the employees and the union in the recent years including; direct selection of workers' representative by workers; strict control on overtime and working hours; effective employee engagement and complaint management both by the company and by the union; additional social events; bonuses; career development opportunities through vocational training and certification programmes; training of team leaders/managers on employee communication and leadership skills; and psychological training and support provided under the Employee Communication Programme in Emergency situations (ODIP programme). The Metal Industrialists Union (MESS) representing automotive companies including Ford Otosan and the Turkish Metal Union (Türk Metal) signed the new Collective Bargaining Agreement on 30th January 2018 which will last two years.

Ford Otosan's EHS standards also apply to its contractors and suppliers through a Ford Corporate Certification Process. This is verified via a contractor and supplier selection process; risk assessment and management procedures; as well as supplier development support. The company will conduct systematic HR audits to address labour issues in its contractors' operations as part of the ESAP.

he internal grievance mechanism available for employees will be enhanced to address the complaints of the contractor workers, as well as the direct company workers. Going beyond the Bank's requirements, the company is considering applying for SA8000 certification with an aim to comply with good international practice in the management of labour issues at its facilities.
In terms of environmental performance, the company operates in line with the requirements of the Turkish Regulatory Framework, which is largely in line with EU Environmental Directives. All emissions are monitored and are within prescribed limits. The production process has a high degree (29 per cent) of water recycling and reuse. Hazardous and non-hazardous wastes are recycled or reused at 99.16 per cent and 100 per cent rates (2016) respectively. Energy demand is high and as such, various energy efficiency investments have been implemented, with the company having an ISO 50001 certified energy management system. This has been coupled with various resource efficiency initiatives. GHG emissions are assessed regularly (certified to ISO 14064) and disclosed via the CDP and annual sustainability report. Current annual GHG emissions are 201,015 tonnes CO2e which represents 0.6 tonnes CO2e /car (decrease from 0.82 tonnes CO2e /car baseline year 2009). Water and energy consumption and GHG emissions per vehicle are decreasing year on year in line with the company targets.

Ford Otosan has high standards in occupational health and safety, which is managed through an OHSAS 18001 accredited management system. The Golcuk facility has been upgraded over the years and has all necessary fire prevention and response equipment in place. The facility is located in an isolated fenced area and no significant negative impacts to communities are expected.

Ford Otosan discloses E&S information through its annual GRI/G4 standard sustainability report and through its website. As a listed company, Ford Otosan discloses certain corporate and operational information through the public disclosure platform. In addition, the company engages with other operators and stakeholders in the local area through regular meetings, newsletters, etc.

Existing stakeholder engagement practices and communication channels are deemed sufficient to communicate the nature of the project to stakeholders. The company will disclose information about the project, including relevant E&S information. In addition, Ford Otosan will review its external grievance mechanism against Bank requirements and publish its availability, including contact details, on its website and in its sustainability report.

Technical Cooperation

The technical cooperation is funded from Inclusion Technical Assistance Framework through the 2016 sources of the Bank's Shareholder Special Fund. The technical cooperation services will be used to support the economic inclusion via improved transition from training into employment for young people in the automotive industry. Up to €125,000 will be used for the development of a 'Vocational Education Model' and an inclusion action plan to address some of the key operational challenges related to the skills mismatch in relation to three areas: internships and work-based learning; skills standards development and verification; partnerships with technical and vocational education and training institutions and local education authorities in the automotive sector.

Company Contact Information

Burak Çekmece, Treasury & Risk Manager
bcekmece@ford.com.tr
+ 90 216 564 71 00
http://www.fordotosan.com.tr/
Akpinar Mh. Hasan Basri Cd. No:2 34885 Sancaktepe / Istanbul

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