OVERVIEW

UPS operates the largest private alternative fuel fleet in its industry, which includes more than 2,000 compressed natural gas, liquefied natural gas, propane, electric and hybrid electric vehicles. Since 2000, UPS's alternative fuel fleet traveled more than 144 million miles making deliveries to homes and businesses. The company's global alternative fuel fleet includes vehicles in the U.S., Germany, France, Canada, Mexico and Brazil.

UPS developed and continues to enhance its fleet using a "rolling laboratory" philosophy - using its alternative fuel fleet as a way to learn about how new technologies and advancements can be adapted for use in a large delivery fleet. The company has invested almost US$15 million to deploy significant numbers of alternative fuel vehicles in its fleet. While maintaining its current alternative fuel vehicles, UPS is also working with manufacturers, government agencies and non-profit organizations to advance new fuel technologies.

FLEET SPECIFICS

Hydraulic Hybrid
In 2006, the U.S. Environmental Protection Agency (EPA) announced the world's first Full Hydraulic Hybrid Urban Delivery Vehicle. The EPA, UPS, Eaton, International Truck and Engine, and the U.S. Army National Automotive Center have partnered to build this unique UPS truck with a full-series hydraulic hybrid drive train that has been patented by EPA. UPS has been testing the vehicle in a real-world setting in the Detroit, Michigan area.

Hybrid hydraulic technology includes two power sources that propel the vehicle - a small fuel-efficient diesel combustion engine and hydraulic components. Hydraulic hybrid technology replaces a conventional drive train with a hydraulic one, which eliminates the need for a mechanical transmission and driveline.

In laboratory tests, this vehicle achieved 60-70 percent improvement in fuel economy and a 40 percent reduction in CO2 emissions over a conventional UPS vehicle.

Hybrid Electric Vehicles
UPS has researched and tested hybrid electric technology since 1998. In 2000, the company deployed a hybrid electric vehicle in its Huntsville, Ala. operations on a 31-mile route, making 150 pickups and deliveries each day. UPS deployed a second-generation HEV that operated in Kalamazoo, Mich. for several months during 2004. In 2007, UPS deployed 50 third-generation hybrid electric vehicles in Atlanta, Dallas, Houston and Phoenix.

The company is in the process of deploying 50 third-generation hybrid electric vehicles. These vehicles promise a 45 percent improvement in fuel economy over the vehicles they are replacing. The 50 vehicles are expected to collectively reduce fuel consumption by 44,000 gallons annually. These trucks will reduce CO2 by 457 metric tons annually. UPS recently announced an order for 200 hybrid electric vehicles - the largest commercial order of such trucks by any company. The new HEVs will be deployed in 2009 and are expected to save 176,000 gallons of fuel and reduce CO2 emissions by 1,786 metric tons each year.

Fuel Cell Vehicles
In a unique collaboration with DaimlerChrysler and the U.S. EPA, UPS operated two hydrogen fuel cell vehicles in Ontario, CA. This project was the first operation of hydrogen-powered vehicles in a commercial fleet in the United States.

Fuel cells work by converting chemical energy - in this case, hydrogen's reaction with oxygen - into electricity without combustion. The reaction of hydrogen and oxygen produce water vapor and heat as its only by-products, or emissions. The lack of any exhaust emissions makes fuel cell technology the ultimate alternative fuel.

Liquefied Natural Gas (LNG)
UPS was the first in the package delivery industry to introduce alternative fuel tractors into its fleet. The company currently operates 11 Liquefied Natural Gas (LNG) tractor-trailers within the company's West Coast fleet. The tractor-trailers travel each day from California to Nevada. As a fuel, LNG is very dense, providing a large amount of energy for the amount of space it occupies. This makes LNG an excellent potential fuel for large trucks that need to travel a long distance before refueling.

Compressed Natural Gas (CNG)
UPS has one of the largest private fleets of CNG vehicles in the U.S., with almost 1,000 package delivery vehicles, including 167 scheduled to join the fleet in early 2008. UPS began extensively using CNG in 1989 to assess its benefits and viability as an alternative fuel. The results have been impressive: particulate emissions are 95 percent lower than with diesel engines; carbon monoxide emissions are 75 percent lower; and emissions of nitrogen oxides are 49 percent lower. UPS recently announced an order for 300 additional CNG vehicles which will be deployed later in 2008.

UPS operates CNG vehicles in the United States, Germany, France and Brazil.

Electric Vehicles
UPS's first foray into alternative fuel vehicles was with a fleet of electric vehicles that operated in New York in the 1930's. The company also operated an electric car in Santiago, Chile in 2001. Additionally, UPS tested 13 zero emission electric minivans in downtown Los Angeles, Calif. These vehicles had a range of 80 to 90 miles and were primarily used to make Next Day Air deliveries and pickups.

In 2004 and 2005, UPS introduced two electric vehicles into its fleet. These zero emission vehicles currently operate in Manhattan, NY.

Propane-Powered Engines
UPS operates 709 propane-powered delivery vehicles in Canada and Mexico. Propane vehicles emilt about one-third fewer reactive organic gases than gasoline-fueled vehicles. Nitrogen oxide and carbon monoxide emissions are also 20 percent and 60 percent less, respectively, than conventional vehicles.