Business

By Daniel Aronssohn 
Agence France-Presse 

BRUSSELS — Europe's prestigious carmakers lead the world in perfecting the internal combustion engine -- but the days of the petrol motor are numbered, and the continent is changing gear.

On Wednesday next week, the European Commission will unveil its plan to reduce carbon emissions from new vehicles to zero within the next decade, to fight climate change.

The EU plans to be carbon neutral by 2050, but petrol and diesel cars remains the continent's main mode of transport and the pride of its globally admired marques.

Sources in Brussels expect the commission's plan, part of a climate climate strategy, to foresee an end to new registrations of gas guzzlers from 2035. Europe's existing emissions limit of less than 95 grams of CO2 per kilometre was to have been reduced by 37.5 per cent in 2030.

Exact figures are still under discussion, but Brussels is now expected to seek a 60 per cent reduction by 2030 and a 100 per cent reduction just five years later in 2035. 

The economic damage the coronavirus pandemic has damaged the road vehicle market as a whole, but electric cars have been an exception, with growth accelerating.

Battery-powered cars represented eight per cent of new registrations in western Europe in the first five months of this year, with 356,000 new vehicles.

'Go to the wall' 

This, noted analyst Matthias Schmidt, represents more than in the whole of 2019.

The impending new regulations will increase this trend, as they will not only spell doom for classic petrol and diesel motors but effectively force out hybrid and hybrid-rechargeable models.

These had once been seen as a transitional technology, a key product for an industry that boasts of employing 14.6 million workers in Europe.

The car lobby is resigned to going along with the changeover, but wants help from Europe, in particular in terms of developing a network of recharging points for battery cars.

"Under the right conditions, we are open to even higher CO2 reduction targets in 2030," said Oliver Zipse, president of the carmakers' association ACEA and chief executive of BMW. 

The industry is divided about the best way forward, with some executives warning too quick a transition will drive up prices and favour Chinese competitors, which have an advance in battery technology. 

But Europe's giant, Volkswagen, which represents one sale in four on the continent, has followed US champion Tesla in backing an all-electric future.

In 2015, the firm was at the heart of a scandal over faked emissions tests on diesel motors, and is keen to restore its image with the public and regulators.

"There is a huge conflict going on at ACEA level," market analyst Schmidt explained. 

"Volkswagen was forced to go early into electric vehicles because of Dieselgate, to improve their image. they have made huge investments and now they have got the products ready to meet CO2 legislation.

"They are in a perfect position to gain market share, and they will be happy to see others go to the wall."

Volkswagen already plans to stop selling vehicle with internal combustion engines between 2033 and 2035.

"In general a car remains on the road for 15 years. If we want transport to be carbon free by 2050, we need the last combustion-driven car to be sold by 2035 at the latest," said Diane Strauss, of pressure group Transport and Environment.

The NGO's latest report, published in June, gives Volkswagen and Volvo good marks for their preparations, with Renault and Hyundai a little behind them.

But BMW, Daimler (which owns the Mercedes brand), Stellantis (Peugeot, Citrion and Fiat) and Toyota are seen as lacking ambition and remaining too wed to hybrids. 

MEP Pascal Canfin, chair of the environment committee in the European Parliament, said the 2035 target date is a good compromise.

He said 2030 would be too soon for industry and workers to adapt, while 2040 would be too late for Europe's climate goals.

But Canfin is holding out for a fund of "several billion" euros to help fund the transition.

WASHINGTON — The world's richest nations must do more to help the poorest countries withstand the "devastating double-blow" of the pandemic and the resulting economic damage, International Monetary Fund (IMF) Chief Kristalina Georgieva said on Wednesday.

Warning of a "deepening divergence" between rich and poor, she called on the G-20 to take urgent steps to keep developing nations from falling further behind in vaccine access and funding to repair their fortunes.

In a blog post ahead of this week's meeting of G-20 finance ministers and central bankers, the head of the IMF said "speed is of the essence" but the price tag is relatively small.

"Poorer nations are facing a devastating double-blow" losing the race against the virus and missing out on key investments that will help lay the groundwork for economic growth, Georgieva said.

"It is a critical moment that calls for urgent action by the G-20 and policymakers across the globe," she said.

While the United States is poised to grow by its fastest pace since 1984 and countries like China and the euro area are gaining momentum, the developing world is being left behind by a "worsening two-track recovery, driven by dramatic differences in vaccine availability, infection rates, and the ability to provide policy support".

She again pressed the G-20 to do more to help get vaccines to the poor countries, including sharing doses, accelerating debt forgiveness, and endorsing the goal of vaccinating at least 40 per cent of the population in every country by the end of 2021, and at least 60 per cent by the first half of 2022.

With less than one adult in 100 fully vaccinated in Sub-Saharan Africa, compared to 30 per cent in advanced economies, those countries are at higher risk for emerging COVID-19 variants.

The IMF estimated that low-income countries will need to deploy about $200 billion over five years just to fight the pandemic, and another $250 billion for economic reforms to allow them to catch up to the richer nations.

But Georgieva said they cannot do that on their own and wealthy nations must "redouble their efforts, especially on concessional financing and dealing with debt".

The Washington-based crisis lender has proposed a $50 billion joint effort with the World Health Organisation, World Bank and World Trade Organisation to expand vaccine access, "a global game-changer" she said would save hundreds of thousands of lives and accelerate the recovery.

In areas where infections continue to rise, she said it is "critical" that businesses and families continue to receive financial support, but once the virus is under control funds can shift to things like worker training programs to "help heal the scars of the crisis", which hit women especially hard.

Georgieva also said the IMF is keeping an eye on rising prices, particularly in the United States, but as the recovery gains traction "it will be essential to avoid overreacting to transitory increases in inflation".

ISMAILIA, Egypt — The megaship MV Ever Given which blocked the Suez Canal for six days in March headed out of the waterway on Wednesday as Egypt and the vessel's Japanese owners signed a final compensation deal.

The ship weighed anchor and began sailing north from near the central canal city of Ismailia towards the Mediterranean Sea, shortly after 11:30am local time (09:30 GMT). 

The nearly 200,000 tonne container vessel became wedged across the canal during a sandstorm on March 23, blocking a vital artery from Asia to Europe that carries 10 per cent of global maritime trade and provides Egypt with vital revenues.

After a round-the-clock salvage operation to dislodge it, Egypt seized the ship and demanded compensation from owners Shoei Kisen Kaisha for lost canal revenues, salvage costs and damage to the canal.

In a ceremony attended by ambassadors and international media, Suez Canal Authority chief (SCA) Osama Rabie inked a final deal with representatives of the owners.

"I announce to the world that we have reached a deal," Rabie said at the ceremony carried live on Egypt's state television.

He called March's salvage operation a "race against time" to restore global shipping flows.

"We were facing a tough test with the world watching," he added.

The SCA announced last month it had signed a non-disclosure agreement with the Japanese firm ahead of reaching a final deal.

Khaled Abou Bakr, a prominent lawyer who headed the SCA negotiating team, reiterated on Wednesday the "secrecy" of the final compensation package.

"I can unequivocally state that we preserved the full rights of the Authority," he said.

Cairo initially demanded $916 million in compensation before slashing that to around $550 million, but the final figure has been the subject of tough negotiations. 

Millions in revenues 

Egypt, which earns more than $5 billion a year from the canal, lost between $12 million and $15 million in revenues each day it was closed, the SCA said.

The ship's grounding and the intensive efforts to refloat it also resulted in significant damage to the canal.

In April, maritime data company Lloyd's List said the blockage by the vessel, which is longer than four football fields, held up some $9.6 billion worth of cargo each day it was stuck.

The Taiwanese-operated and Panama-flagged vessel was refloated on March 29, and tailbacks of 420 vessels at the canal's northern and southern entrances were cleared in early April.

On Tuesday, the Ismailia Economic Court ruled that the seized ship and its crew was being released following a request from the SCA.

It resumed its journey on Wednesday with its cargo of 18,300 containers intact, according to SCA sources. 

In a Sunday television interview, Rabie said the Ever Given had suffered "no leakage".

He said also Egypt would receive a 75 tonne tugboat from Shoei Kisen Kaisha as part of the compensation package, and noted that the family of a rescue worker who died during the salvage operation would be compensated.

"The Suez canal has always been a site of sacrifices since it was built," he said.

Canal expansion 

Rabie waved off the megaship as it headed for the Mediterranean surrounded by white-clad captains waving Egyptian flags. SCA boats honked loudly to celebrate its departure.

In a show of appreciation, the SCA also presented a silver plaque to the Ever Given's captain and crew, who had been stranded for months.

At a press conference after the signing, Rabie noted "the difficulty in the negotiations was to bring the varying viewpoints closer because each side was sticking to its position".

Even with the ship's grounding, Rabie said on Sunday that canal revenues in the first half of the year had topped $3 billion.

Officials have been keen to avoid reputational damage from the incident, trumpeting Egyptian efforts in the salvage operation. 

President Abdel Fattah Al Sisi swiftly pledged investment to avoid any repetition of the crisis, and in May approved a two-year project to widen and deepen the southern part of the waterway where the ship ran aground.

Sisi had overseen the $8 billion expansion of a northern section of the canal to much fanfare in 2014-15.

LONDON — European carmaker Stellantis on Tuesday said it was keeping its Vauxhall plant in northern England, which will become the group's first factory to produce a solely battery-electric vehicle.

It is pumping £100 million ($138 million, 117 million euros) into the facility, with help from the UK government, to produce electric light commercial vehicles and passenger vans, Stellantis said in a statement.

Stellantis, which was created in January via the merger of French giant PSA and Italian carmaker Fiat, has been mulling the future of Vauxhall's Ellesmere Port plant on the northwest English coast, which employs more than 1,000 staff.

Prime Minister Boris Johnson described the news as "a huge vote of confidence" in Britain's post-Brexit economy.

UK Business Secretary Kwasi Kwarteng added that the development "will secure thousands of jobs across the region in the supply chain". 

Stellantis became the world's fourth biggest carmaker by volume after marrying PSA brands Peugeot and Citroen with Fiat, Chrysler, Jeep, Maserati and others.

Vauxhall, along with Opel, became part of PSA in 2017 after it purchased General Motors' European subsidiary.

From next year, the Ellesmere Port plant will produce an electric light commercial vehicle and passenger car variant for each of the Citroen, Opel, Peugeot and Vauxhall brands for sale in the UK and abroad.

The passenger car versions will have up to seven seats.

A separate Vauxhall factory in Luton, near London, is reportedly operating at full capacity to produce vans.

"Producing battery electric vehicles... [at Ellesmere] will support clean, safe and affordable mobility," said Stellantis chief executive Carlos Tavares. 

The company added that its "dedication to battery electric vehicles will go towards achieving the UK government's decision to stop sales of pure petrol and diesel engined vehicles from 2030".

'Global race' 

Car manufacturers are rapidly shifting away from vehicles that run on fossil fuels, as governments ramp up efforts to meet net zero carbon emissions by 2050.

"In this global race to secure electric vehicle production, we are proud to support Britain's auto sector," Kwarteng added.

Stellantis on Tuesday said it was looking at Ellesmere Port becoming carbon neutral by 2025.

British trade union Unite hailed news that the plant's future had been secured.

"Unite has battled for years to secure the future of this site," said Unite general secretary Len McCluskey.

"At times the uncertainly has been unbearable but these plans have ended that, with Ellesmere Port's workers now set to proudly play a leading role in the UK's green transport revolution."

Thanks also to UK government investment, Japanese carmaker Nissan last week unveiled plans to build a massive battery factory in northeastern England, where it will also manufacture a new electric vehicle.

The battery plant, which will power up to 100,000 Nissan electric vehicles annually.

Europe now has projects to build dozens of huge battery factories that could potentially produce 16.7 million battery-electric vehicles by 2030, according to Transport & Environment, a non-governmental organisation.

WASHINGTON — The dominant service sector of the US economy continued to grow strongly in June, but at a less red-hot pace amid supply issues and a slowdown in hiring, according to an industry survey released on Tuesday.

After setting a record in May, the Institute for Supply Management (ISM) said its service sector index fell 3.9 points to 60.1, which still indicates a strong expansion. Any reading above 50 indicates growth.

The sector — which accounts for about two-thirds of the US economy — has been growing for 13 consecutive months according to the ISM non-manufacturing index, and has expanded for all but two months for 137 months.

"The rate of expansion in the services sector remains strong, despite the slight pullback in the rate of growth from the previous month's all-time high," survey chair Anthony Nieves said in a statement. 

"Challenges with materials shortages, inflation, logistics and employment resources continue to be an impediment to business conditions."

New orders and deliveries slowed, but hiring actually declined last month after five months of increases, as the employment index dropped six points to 49.3 per cent.

One survey respondent summed up the difficult labor market: "Employees have been somewhat slow to return to work, and there has been turnover as some pursue new opportunities in a hot job market."

The prices index retreated slightly but remains at stunning 79.5 per cent, the survey showed, reflecting rising prices for materials like lumber, fuel and even packaging.

Only two of 18 industries reported a slowdown in June: Real estate and agriculture, ISM said.

"The summer services revival has taken hold," Kathy Bostjancic of Oxford Economics said in an analysis. "Looking ahead, reopenings and rising confidence fuelled by the much-improved health backdrop — despite the recent uptick in cases — will continue to propel the services boom."

She projected the hiring issues would ease in coming months.

LONDON — US oil prices briefly spiked on Tuesday to near a seven-year peak after OPEC+ crude producers failed to agree on lifting output, fuelling concern about inflation.

But the prices then fell sharply as traders mulled the longer-term implications.

Stocks in Europe and the US fell meanwhile, as several factors appear to have lessened investor appetite for risk, an analyst said.

The contract for West Texas Intermediate (WTI) crude for August delivery leapt to $76.98 per barrel, a level last seen in November 2014, before plunging to $73.45 in later trading.

The price of Brent North Sea oil advanced to a November 2018 peak at $77.84 before plummeting to $74.65.

The OPEC+ group on Monday cancelled a meeting that was supposed to overcome an impasse between the United Arab Emirates and other members on how to lift output. No new date has been set.

"It looks like the market is more worried about a potential crisis at the cartel than it likes the lack of fresh supply coming on in the second half" of the year, Markets.com analyst Neil Wilson remarked.

Deadlock 

Oil producing nations have slowly lifted output in recent months after turning the taps down last year in response to a collapse in prices caused by coronavirus lockdowns.

With demand rocketing on the back of the global rebound — and the US holiday driving season under way — officials had planned to hike output each month by 400,000 barrels a day from August to December.

If no new supplies are forthcoming, the price of oil could hit $80 a barrel or more, some traders say, but if OPEC plunged into crisis, producers might just pump as much crude as they could to take advantage of current price levels.

"Traders seem concerned that the speculative positioning could be unwound in the coming days if the OPEC+ deal were to start to unravel, ultimately leading to more crude and a less stable oil market," Wilson said.

Meanwhile, European equity markets dipped after a mixed Asian session, and in New York, the Dow Jones index rose at first as traders came back from the Independence Day weekend, but then fell back on downbeat data from the service sector.

Hong Kong's tech firms remained in focus owing to fears that a new crackdown on the sector by Chinese authorities will make them unattractive to investors.

"Risk appetite is fleeing as investors return from the long holiday weekend with some jittery headlines on more crackdowns from Beijing, nervousness about the goldilocks period for stocks, and expected further hawkish notes" from a US Federal Reserve (Fed) meeting to be released on Wednesday, commented Edward Moya, a senior analyst at OANDA.

The release of minutes from the Fed's June meeting should provide clues about its monetary policy outlook.

The spike in oil prices has reignited fears about strong inflation, which could force central banks to hike interest rates earlier than thought — and potentially derail the post-COVID recovery.

"Surging oil prices are not good news for the global economic recovery," OANDA analyst Sophie Griffiths said.