Major International Business Headlines Brief::: 07 June 2019

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Major International Business Headlines Brief::: 07 June 2019

 


 

 


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*  South African current account deficit widens in Q1

*  Nigerian petroleum regulator revokes six oil block licences

*  Kenyan president renews central bank governor's term - Citizen TV

*  South African rand volatility gauge touches near 2-month high

*  Kenyan shilling seen stable as Central bank governor term extended

*  Guinea iron ore prospectors set sights on ArcelorMittal rail

*  Barack and Michelle Obama to produce podcasts for Spotify

*  Brexit: Government preparation bill tops £97m

*  Ford set to close Bridgend engine plant in 2020

*  The decline of cash in the UK - in charts

*  Aviva to cut 1,800 jobs worldwide

*  US regulator acts over plague of nuisance phone calls

*  Five reasons the car industry is struggling

 


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South African current account deficit widens in Q1

PRETORIA (Reuters) - South Africa’s current account deficit widened to 2.9% of gross domestic product (GDP) in the first quarter of 2019, from a 2.2% shortfall in the fourth quarter of the previous year, central bank data showed on Thursday.

 

The quarterly deficit came in slightly below the 3.05% of GDP forecast by economists surveyed by Reuters.

 

The quarterly trade balance narrowed to 43 billion rand ($2.89 billion) from 71.8 billion rand in the three months to the end of December.

 

Africa’s most advanced economy relies on foreign portfolio inflows to finance gaping current account and budget deficits that have widened in recent years as tax revenues and fixed investments shrink.

 

Weak domestic growth and trade uncertainty globally have mainly been to blame.

 

GDP contracted by a larger than expected 3.2% in the first quarter, data showed this week, as power cuts over the period battered mining and manufacturing, suggesting the country will struggle to achieve annual growth above 1%.

 

Recent economic figures have shown activity remains subdued and is unlikely to increase substantially in the remainder of the year as power supply from cash-strapped utility Eskom remains a key constraint.

 

“The deterioration in the trade balance came about as the value of merchandise exports decreased more than that of imports,” the Reserve Bank said in a statement.

 

The wider current account deficit was mainly due to a “small widening in the deficits of the services and current transfer accounts, whereas the deficit of the income account remained almost unchanged”, the bank said.

 

($1 = 14.8731 rand)

 

 

 

 

 


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Nigerian petroleum regulator revokes six oil block licences

LAGOS (Reuters) - Nigeria’s petroleum regulator has revoked six oil block licences due to “legacy debts”, it said in a public notice on Thursday.

 

The notice, carried in some Nigerian newspapers, said the move by the Department of Petroleum Resources was “in furtherance of the presidential directive”.

 

The action comes as Nigeria takes a more aggressive approach to collecting taxes and royalties that the country says it is owed. Oil industry sources said Nigeria has also been increasingly vocal about rescinding licences that are not being actively developed.

 

The notice said oil mining lease (OML) 98 was revoked from Pan Ocean Oil Corporation, OML 120 and 121 from Allied Energy Resources Nigeria Limited, OML 108 from Express Petroleum & Gas Company Limited and OML 110 from Cavendish Petroleum Nigeria Limited.

 

The notice also said oil prospecting licence (OPL) 206 was revoked from Summit Oil International.

 

Details of the size or value of the blocks were not immediately available.

 

A spokesman for the president declined to comment. A petroleum ministry spokeswoman did not immediately respond to a request for comment.

 

 

 

Kenyan president renews central bank governor's term - Citizen TV

NAIROBI (Reuters) - Kenyan President Uhuru Kenyatta has renewed Central Bank Governor Patrick Njoroge’s term, local station Citizen Television said on Thursday.

 

Njoroge was first appointed to his post in June 2015 for a four-year term, which is renewable once.

 

Njoroge is a U.S.-educated economist and worked as an adviser at the International Monetary Fund before becoming governor in 2015.

 

During his first term, the government introduced a cap on commercial lending rates in 2016 as well as moratorium on the issuance of new commercial bank licences in 2015.

 

His first term saw the government introduce of caps on commercial lending rates in 2016, the introduction of a moratorium on issuance of new commercial bank licences in 2015.

 

At the time, the temporary closure of Chase Bank Kenya, which followed the closure of Imperial Bank, another mid-sized lender, and Dubai Bank Kenya, a smaller lender, had dented confidence in the industry, which has also seen a jump in bad debts.

 

 

 

South African rand volatility gauge touches near 2-month high

LONDON (Reuters) - A South African rand volatility gauge touched a near two-month high on Wednesday, as the currency remained under pressure from dire economic data and a fierce debate over the central bank’s mandate.

 

One-month implied volatility hit 14.65 vols, the highest level since April 10, before easing back to stand at 1-month high of 14.5 vols.

 

Data out on Tuesday showed the continent’s most industrialised economy had suffered it worst quarterly contraction in a decade at the start of the year.

 

The rand is also reeling from news that South Africa’s ruling party is arguing over whether to change the central bank’s mandate to include employment and growth as well as inflation. [nL8N23B29A] Investors are wary of any changes that could curb the prized independence of the bank.

 

 

 

Kenyan shilling seen stable as Central bank governor term extended

NAIROBI (Reuters) - The Kenyan shilling was stable against the dollar on Thursday after the government’s announcement that Central Bank Governor Patrick Njoroge’s term had been renewed for another four years effective June 18, traders said.

 

At 0900 GMT, commercial banks quoted the shilling at 101.30/50, the same as Tuesday’s close. Markets were closed on Wednesday for a public holiday.

 

“It represents continuity of policy,” said a trader from one commercial bank.

 

 

Guinea iron ore prospectors set sights on ArcelorMittal rail

LONDON/CONAKRY (Reuters) - The race to mine Guinea’s iron ore has started although the focus is not on its giant Simandou deposits but on smaller finds whose output could be transported via Liberia if ArcelorMittal shares its railway, banking and industry sources said.

 

Guinea’s aspirations to develop Simandou, the world’s largest known untapped iron ore deposit, have foundered because of the cost of infrastructure and protracted legal disputes.

 

Guinea says it is still trying to reach a deal with China to build the roughly 650 km (406 miles) of railway needed to transport the iron ore through Guinea.

 

In the interim, the government has signed economic cooperation deals with Liberia, which would allow iron ore to be transported from Guinea’s smaller Zogota project along a railway through the neighbouring West African nation.

 

Zogota is being developed by former Xstrata boss Mick Davis, who wants to relaunch his mining career and says he has clinched an outline government accord on Liberian shipment.

 

Davis, also chief executive of Britain’s ruling Conservative Party, said the aim was to complete a feasibility study within six months and bring the project rapidly into production.

 

Elsewhere, BHP, together with Newmont, holds Guinea’s Mount Nimba deposit. However, BHP says the Nimba deposit does not fit with its focus on assets in stable, developed countries.

 

HPX, a privately-owned U.S. corporation, led by mining billionaire Robert Friedland, had been interested in acquiring a stake, industry and banking sources said, but a deal has yet to be signed.

 

A BHP spokesman said he could not comment. A spokesman for Friedland also declined to comment. Newmont was not immediately available for comment and neither was Davis’ firm Niron.

 

Both Nimba and Zogota would need to reach agreement with ArcelorMittal, the sole rail concession holder in Liberia, to convince it to allow them to use its infrastructure.

 

Investment in road and port improvements could also be required.

 

ArcelorMittal said in an emailed statement that its mining agreement allowed third parties access to its railway if that did not “unreasonably interfere with ArcelorMittal’s operation and thereby revenue flow for the people of Liberia”.

 

But it said its main aim was to boost its Liberian production.

 

In a text message, Guinean Mining Minister Abdoulaye Mgassouba said the country’s aim was that “all the projects to exploit iron ore are developed in a way to give Guinea a presence on the market and to get the full benefit of its potential”.

 

 

Barack and Michelle Obama to produce podcasts for Spotify

Former US President Barack Obama and his wife Michelle have agreed to produce a series of podcasts for music streaming platform Spotify.

 

The couple's production company, Higher Ground, announced on Thursday a multi-year partnership with the music giant.

 

Under the deal, they will "develop, produce, and lend their voices" to podcasts distributed worldwide.

 

The Obamas launched Higher Ground in 2018 with a deal to produce Netflix films, documentaries and series.

 

A joint statement announcing the latest venture said the move into podcasts would allow them to "expand the conversation".

 

"Podcasts offer an extraordinary opportunity to foster productive dialogue, make people smile and make people think, and, hopefully, bring us all a little closer together," Mr Obama said in the statement.

 

The former first lady said the podcasts would "amplify voices that are too often ignored or silenced altogether".

 

The statement did not detail specific topics the podcasts would cover or when they would become available.

 

Spotify is the world's largest music streaming service and has more than 217 million monthly active users.

 

It is currently investing heavily in podcasting as it seeks to move beyond music.

 

Speaking of the partnership with the Obamas, the company said it was a "privilege" to be working with "two of the world's most important voices".

 

The announcement on Thursday followed reports that another US political family was moving into media production.

 

Sources told US media outlets last week that former Democratic presidential candidate Hillary Clinton and her daughter Chelsea are in talks to form a film and TV production company that will focus on creating content about women.--BBC

 

 

 

Brexit: Government preparation bill tops £97m

Preparing for Brexit has cost the UK government £97m so far, the National Audit Office has revealed.

 

The money has been spent on hiring external consultants because government departments lack the staff and skills needed, the NAO said.

 

But it criticised the government for a lack of transparency, saying details of contracts had not been published in a timely fashion.

 

It also said the bill was higher than disclosed by the Cabinet Office.

 

According to the Cabinet Office, £65m had been earmarked for consultancy services between April 2018 and April 2019.

 

But NAO investigations uncovered another £32m worth of spending in the same period.

 

NAO: Government was warned about Brexit ferry payouts

Brexit divorce cost 'uncertain'

Many contracts had been extended, particularly in April this year, when the date for the UK's departure from the EU was changed to 31 October.

 

"Departments continue to prepare for EU exit and total spend on consultancy support will rise," the NAO said.

 

Specialist skills

Under government guidelines, departments are supposed to publish details of such contracts within 90 days.

 

But the NAO found it had taken an average of 119 days for basic information about Brexit consultancy contracts to be published.

 

It added that six consultancy firms had received 96% of Brexit-related work, led by Deloitte, with 22% of the contracts by value.

 

The others were PA Consulting (19%), PwC (18%), EY (15%), Bain & Company (11%) and Boston Consulting Group (10%).

 

A government spokesman defended the spending, saying it was "often more cost-efficient to draw upon the advice of external specialists for short-term projects requiring specialist skills".

 

He added: "These include EU exit priorities such as ensuring the uninterrupted supply of medical products and food to the UK."

 

A spokeswoman for the Management Consultancies Association said consultants had been "proud to provide expert support to the government with its Brexit preparations during this critical time".

 

She added: "Departments have faced an unprecedented volume of workload planning for all Brexit scenarios and using external resources has enabled the government to work quickly and with intensity on major programmes across the UK."--BBC

 

 

 

 

Ford set to close Bridgend engine plant in 2020

Ford's engine plant in Bridgend is set to close in autumn 2020, with the loss of 1,700 jobs.

 

Union officials were told of the plans at a meeting with Ford bosses which include the offer of redeployment.

 

Workers were sent home after receiving a letter which said they will lose their jobs in phases by 25 September next year.

 

Ford blamed "changing customer demand and cost" for the closure plans and denied Brexit was a factor.

 

In a statement, Ford of Europe president Stuart Rowley said creating a sustainable business required the company to make "difficult decisions", including the need to make its engine manufacturing base suitable for the vehicles it produces in the future.

 

"We are committed to the UK. However, changing customer demand and cost disadvantages, plus an absence of additional engine models for Bridgend going forward make the plant economically unsustainable in the years ahead."

 

Later, he said the decision was nothing to do with Brexit although he realised the company's plans would be "very significant for the employees, their families and the community in south Wales".

 

As it happened: Bridgend reacts to Ford closure plans

Political reaction: 'Workers deserve better'

Bridgend 'hanging on by its fingernails'

Mr Rowley has confirmed the company will repay £11m in incentives offered by the Welsh Government.

 

Economy minister Ken Skates said he was "absolutely livid" at Ford's decision to "turn their back on Bridgend".

 

"We pumped a huge amount of money into this facility and we expected more from Ford."

 

He told Gareth Lewis on BBC Radio Wales that he was working with the chemicals company Ineos and others "who would like to come to this area".

 

He added the site is "a priority" for any inward investment.

 

 

Workers at the plant said they were devastated.

 

"I'm expecting to lose my job," said Tony Phillips, who has been at the plant for 31 years, adding that they were "good, well-paid jobs".

 

Fellow worker Mark Lendrum said: "South Wales is going to be like a ghost town."

 

Leader of Bridgend council Huw David, said there is "not a family in Bridgend that won't be affected by this" and it is a "fabulous workforce" from Newport to Llanelli.

 

"We don't know how we are going to recover from this.

 

"Both governments want to keep the jobs here. We as the council will help people to find other work," he said.

 

Graham Rees has worked at Ford in Bridgend for 35 years.

 

"You see work come and go, when an engine dies off, there's a replacement, but this time, what do you do?

 

"It doesn't matter what you're building, if people don't want to buy it, it's at the end at its life, full stop," he said.

 

"You get a feeling that yes, the end is nigh, but nobody wants to admit that, so you prepare yourself and get on with it.

 

"There is no light at the end of the tunnel, you've just got to face the truth."

 

The closure news comes just months after Ford said it was cutting its Welsh workforce by 1,000, with 370 going in a first phase.

 

Investment in a new petrol engine, called Dragon, was scaled back, while production of an engine for Jaguar Land Rover is due to end this year.

 

Ford Bridgend loses out in global race

Electric cars hope for Bridgend

Just days ago, it was revealed that car sales in the UK had fallen again.

 

GMB regional organiser Jeff Beck said: "We're hugely shocked by today's announcement. It's a real hammer blow for the Welsh economy and the community in Bridgend."

 

He said the union would continue to work with Ford, other unions and the Welsh Government "to find a solution to the issue and mitigate the effects of this devastating news".

 

Unite union general secretary Len McCluskey said Ford had treated its UK workers "abysmally".

 

"The fact remains that it is cheaper, easier and quicker to sack our workers than those in our competitor countries," he said, vowing to "resist this closure with all our might".

 

How Ford came to Bridgend

Ford chose Bridgend for its new engine plant in the summer of 1977 after competition from elsewhere in Europe, chiefly from Ireland.

 

The company needed an engine for its new model - code-named Erika - which became the next generation Ford Escort.

 

It was to be built at Halewood on Merseyside and at Saarlouis in Germany from 1980.

 

The promise had been for 2,500 jobs but by the time it opened in May 1980, Ford had decided to take on only 1,400 workers. There were 22,000 people applying for the roles.

 

Concerns about the plant's long term future were raised more than a decade ago when the decision was taken to no longer have Ford UK and Ford Europe making different designs of cars compared with the USA and rest of the world.

 

 

Welsh Secretary Alun Cairns said he knew it was an "extremely worrying and uncertain time for Ford workers, their families in Bridgend and the surrounding communities".

 

"The UK government will work closely with Ford, the trade unions and the Welsh Government, to make sure this highly-valued workforce can move into new skilled employment."

 

Earlier, Mr Cairns told BBC Wales he had been in touch with Ken Skates about exploring the production of electric vehicles as a means of protecting jobs in the Bridgend area.

 

Mr Cairns said the UK government and Welsh Government "have already been working on potential investors" but "clearly there is a lot more work".

 

He added that "the Brexit issue doesn't stand up" in being a part of Ford's decision.

 

But Bridgend Labour MP Madeleine Moon said she believed it was "very clearly about Brexit".

 

"The knock-on effect to the south Wales economy is huge - there are 12,000 associated jobs.

 

"The map has just been rubbed out," she said.

 

 

Mr Skates said the Welsh Government would provide a "rapid response taskforce to support workers".

 

Since 1978 about £140m in taxpayers' money has been invested in the plant, Mr Skates said.

 

That had been "money well spent" since the plant had "pumped back" £3bn into the Bridgend economy over the last 10 years alone, Mr Skates said.

 

"What we have repeatedly said to Ford over recent months and years is that Wales stands ready, it is perfectly situated and positioned to help businesses."

 

First Minister Mark Drakeford said the news was "incredibly sad", and pledged the Welsh Government would do "everything in its power" to support those affected and to "work with all partners to explore options for the future of the plant".

 

Plaid Cymru leader Adam Price said closure would be "one of the most bitter blows" to the Welsh economy for more than 30 years.

 

"The implications of this in terms of the supply chain in terms of job losses is very, very grave indeed," he added.

 

2008: Ford announces it will operate as a single global company - meaning its Bridgend engine plant had to compete with the firm's other factories across the world, not just in Europe

 

2015: Bridgend secures investment for Dragon petrol engine project - with 250,000 engines a year, although it has capacity for 750,000 a year

 

2016: The planned Dragon investment is reduced to £121m and the number of engines is cut in half to 125,000

 

2017: Ford projects a reduction of 1,160 workers by 2021 and confirms production of Jaguar Land Rover engines - which involves half the workforce - will end in 2020

 

2018: Workers making Jaguar engines face a five-day shutdown as a knock-on effect from JLR's temporary production halt. Ford's European boss warns a no-deal Brexit would be "pretty disastrous"

 

Jan 2019: Ford plans to cut 370 jobs the first phase of redundancies which will total 990 by 2021. The Dragon project was scheduled to employ about 500

 

June 2019: Ford announces it plans to close the plant in September 2020 citing three reasons - the phasing out of one engine model, the end of Jaguar Landrover contract and a decline in the demand for the new 3-cylinder engine

 

What's happening to the car industry?

Several car firms with UK factories, including Honda, Jaguar Land Rover and Nissan, have announced significant cuts. This is down to a combination of different reasons.

 

The car industry troubles have been blamed in part, "because the trade future is uncertain with Brexit," according to consultant Anne-Marie Blaisden.

 

But the head of autos research for Fitch Solutions added there had also been a "shift away from what is being made at the moment, in terms of diesel cars".

 

What's behind the car industry crisis?

BMW and JLR join forces on electric cars

Fiat Chrysler withdraws bid for Renault

Karel Williams, an automotive expert from Manchester Business School said the plant closure is "collateral damage" from other "larger developments" such as the push towards electric engines.

 

He also said it highlighted the limits of the Welsh Government's "inward investment strategy".

 

Analysis by James Williams, BBC Wales Brexit correspondent

It's the Brexit equivalent of a Rorschach test - you can interpret the inkblot or decision in different ways.

 

Those who want to see us stay in the EU see Brexit as a factor in Ford Bridgend's closure, whilst Brexiteers point the finger of blame at the wider pressures bearing down on the automotive industry - from a shift to electric cars to falling demand from China.

 

Ford announced back in December that it was restructuring its operations right across Europe.

 

As part of that change, a plant in Bordeaux in France is to be closed and thousands of jobs cut in Germany. Brexit, obviously, was not a factor in those decisions.

 

Given that context, here in Wales and the UK, the additional issue of Brexit and the ongoing uncertainty over what kind of economic relationship we'll have with EU's single market doesn't help matters.

 

Nissan, when it announced its decision to move production from Sunderland to Japan, said Brexit uncertainty is not helping them "plan for the future" whilst Honda said that its plant closure in Swindon wasn't related to our departure from the EU.--BBC

 

 

 

The decline of cash in the UK - in charts

Cash use is falling, with predictions that fewer than one in 10 transactions will be completed with notes and coins in 10 years' time.

 

Ten years ago, cash was used in six out of 10 payments, but it has been overtaken in popularity by debit cards, driven by the use of contactless technology.

 

A review of payments, published by banking trade body UK Finance on Thursday, said cash was here to stay, but would play a less important role in the future.

 

The most recent figures show cash payments are still common, but declining - down 16% from 2017 to 2018, while debit card use is rising.

 

Contactless payments on debit cards were once used primarily by young adults, but older consumers have adopted the technology, with some of the biggest rises in the last year among pensioners.

 

The use of contactless was given a massive leg-up a few years ago, when it was adopted by the London Underground. Now, however, other regions have caught up with - or overtaken - London in terms of the proportion of adults who make contactless payments.

 

Who is worst hit by the decline in cash?

Cash or no cash - where do you stand?

The Swedes rebelling against a cashless society

Theories about the lower take-up in the North West of England include an ageing population in coastal towns sticking with cash, plus the lack of digital access owing to a lack of connectivity in areas such as the Lake District.--BBC

 

 

 

Aviva to cut 1,800 jobs worldwide

UK insurer Aviva has said it will cut 1,800 jobs worldwide over the next three years in order to reduce costs, and plans split its business into two.

 

Aviva has offices in 16 countries and a global workforce of 30,000 people, with 16,000 employees in the UK.

 

The firm's UK sites include London, Norwich, York, Dorking, Bristol, Perth, Sheffield, Eastleigh and Glasgow.

 

The Unite union said that Aviva's UK workforce would be "shocked" by news of the job cuts.

 

"The scale of this role reduction will be met with disbelief across the company," said Unite's officer for Aviva, Andy Case.

 

The company said that it intended to consult its operations in each country over the job cuts, and would try to make savings through natural turnover and voluntary redundancies. It aims to cut costs by £300m a year by 2022.

 

'Tough decisions'

Aviva announced that it would be splitting its life and general insurance businesses and manage them separately.

 

Chief executive Maurice Tulloch - who started in his role in March this year - said that the insurer's "complexity" had held back its performance "for too long".

 

"Today is the first step in our plan to make Aviva simpler, more competitive and more commercial. We have strong foundations: excellent distribution, world class insurance expertise, and our balance sheet is robust," he said.

 

"But there are also clear opportunities to improve. Reducing Aviva's costs is essential to remain competitive and this means tough decisions and job losses which I do not take lightly. We will do all we can to minimise redundancies and support our people through this."

 

Unite's Andy Case said the union had made it clear to management that it would "strongly challenge any attempt to make compulsory redundancies".

 

"Instead, any staff reductions must be found through volunteers, natural attrition, reducing reliance on contractors and redeployment."--BBC

 

 

 

US regulator acts over plague of nuisance phone calls

Americans plagued by billions of unwanted robocalls to their phones are about to get some relief.

 

The Federal Communications Commission has approved rules to make it easier for carriers to stop automated calls.

 

Phone firms will use algorithms and network scanning to block calls in the way that emails are screened for spam.

 

It won't stop all calls - and customers can opt out - but the regulator says it will help with the some 5 million robocalls a month consumers receive.

 

Says FCC chairman Ajit Pai: "There is one thing in our country today that unites Republicans and Democrats, liberals and conservatives, socialists and libertarians, vegetarians and carnivores, Ohio State and Michigan fans: It is that they are sick and tired of being bombarded by unwanted robocalls."

 

Record $120m fine for nuisance robocalls

Chinese 'robocall' scam hits US met office

Although some phone carriers offer blocking functions on an opt-in basis, the FCC will let telecom operators make it a default option.The communications regulator will also allow companies such as AT&T, Verizon and T-Mobile to offer customers the choice to block calls from any number that is not on their contact list or other approved numbers.

 

FCC commissioner Geoffrey Starks said action was urgently, adding: "Put simply, by allowing these calls to proliferate, we've broken the phone service in this country."

 

The crackdown would free up network capacity and cut the number of consumers being scammed by criminals, he said.

 

However, there is no requirement to make telecoms companies provide the call-blocking service for free. Mr Starks said he would have "serious concerns" if they started charging.

 

Record fine

The major carriers welcomed the FCC's move. Verizon said it meant "we'll be able to provide our customers the benefits of spam alerts and blocking more broadly and conveniently".

 

Apple announced this week that its new iPhone operating software would give consumers the ability to allow only calls to ring from numbers in contacts, mail, and messages and send all others to voicemail automatically.

 

Last year, a man was fined a record-breaking $120m (£88m) for making more than 90m automated marketing telephone calls in the US.

 

Miami salesman Adrian Abramovich was accused of trying to sell holidays and timeshare properties with the unsolicited robocalls.

 

The fine was the largest the FCC had has ever issued.--BBC

 

 

 

Five reasons the car industry is struggling

News that Ford plans to close its Bridgend plant next year, with the loss of 1,700 jobs, is just the latest in a series of blows for the UK car industry.

 

In February, Honda said it would close its Swindon plant by 2021, with the loss of about 3,500 roles, while Jaguar Land Rover and Nissan are also cutting production and jobs.

 

It comes as carmakers around the globe struggle with a range of challenges, while consumers are buying fewer cars.

 

So what's holding manufacturers back?

 

1. Falling demand

After years of strong growth, global car sales were broadly flat in 2018, largely because of a slump in demand in the world's biggest market, China.

 

It has hurt carmakers who had been doing brisk business in China, says Dave Leggett, editor of the car industry website just-auto.

 

Nissan chooses Japan over UK to build new X-Trail car

Honda confirms Swindon car plant closure

"Trade tensions between Washington and Beijing have hit confidence in China generally. The economy was slowing down anyway, but that accentuated it," he says.

 

Jaguar Land Rover has blamed its poor performance recently on falling Chinese demand, while Ford has pulled plans to sell a Chinese-made Ford Focus in the US because of the impact of trade tariffs.

 

The Chinese slump comes as demand in two other giant car markets, Western Europe and the US, has also slowed amid waning consumer confidence.

 

"It is creating more competition, which makes it tougher for everyone," Mr Leggett says.

 

2. Emissions woes

In Europe, emissions issues are also causing headaches for car firms.

 

Air quality concerns and taxation changes have led to a big drop-off in diesel sales, contributing to a 7% fall in new car registrations in the UK in 2018.

 

More challenging, perhaps, is the introduction of tough new CO2 emission standards, designed to tackle global warming, that make it much more expensive to build cars.

 

>From 2021, manufacturers will face big fines in the EU if their fleets break agreed emissions limits, and these targets will get progressively tougher.

 

"Carmakers have to add on average €1,000 of content to cars to make them comply with the new rules," says Arndt Ellinghorst, an automotive industry analyst at Evercore ISI.

 

"It means consumers will be less inclined to buy, which only adds to the general slowdown in consumer confidence."

 

A lack of charging infrastructure is 'holding the electric car market back'

3. The electric challenge

To get their emissions levels down, carmakers are also going to need to sell a lot more electric vehicles, but there are big obstacles in the way.

 

"A lot of carmakers are not ready to deliver electric vehicles at the right quantities," says Mr Leggett. "They need to change their operations and gear the cars much more to a mass market, but that requires investment."

 

The other side of the problem is that the market isn't quite ready for electric cars.

 

Global sales of battery electric cars surged 73% in 2018 to 1.3 million units, but that was still just a fraction of the 86 million cars sold overall.

 

Brexit: Car investment halves as industry hits 'red alert'

UK car output driven down by plunging demand in China

Ford set to close Bridgend engine plant in 2020

According to Dr Jonathan Owens, supply chain and logistics expert at the University of Salford Business School, one issue is the lack of charging infrastructure on roads in Europe and the US, although he says China is making great strides in this area.

 

Another is about the limited range of some mid to lower-market electric cars.

 

"Ford has had an electric Ford Focus since 2011, but the range is hopeless compared to competitors at less than 100 miles," Dr Owens says.

 

"And the VW golf can only drive for about 120 miles."

 

Could driverless cars change our relationship with vehicle ownership?

4. A shift away from ownership?

Other worries are weighing on carmakers' minds, too - one being the emergence of new technologies that could radically change our relationship to car ownership.

 

If driverless cars go mainstream over the next 15 years, Mr Leggett says, then many of us might opt to share or rent rather than own our own vehicles.

 

That could slash the cost of travel per mile, making ownership seem much less appealing.

 

Traditional car companies are having to fight to stay relevant as technology giants such as ride-hailing firm Uber and Google's driverless car business Waymo dive into this market.

 

However, the research and development (R&D) costs a lot and so many are teaming up to spread the risk.

 

Recent examples include Ford and Volkswagen's agreement to "investigate" ways of working on electric and autonomous vehicles together, while Honda invested $2.75bn (£2.1bn) in rival General Motors' driverless unit with a view to launching a fleet of unmanned taxis.

 

Image caption

Jobs in the UK car industry grew between 2010 and 2017 amid strong demand

5. Brexit

In the UK, car firms have been warning repeatedly of the dangers of a no-deal Brexit since the EU referendum in 2016.

 

And investment in the UK car industry has fallen in the last two years, slumping 46.5% in 2017 alone.

 

The problem, analysts say, is that British car plants rely heavily on components imported from the EU, while most of the finished cars they produce are exported to the European mainland.

 

"If we are going to have uncertainty in the form of tariffs, then that will cause bottlenecks and delays which will make UK plants less economic," says Dr Owens.

 

However, Mr Leggett stresses Brexit is only one of many factors troubling the UK industry.

 

"Firms are seeing lower exports to China, and sluggish sales in Europe. The UK economy isn't that buoyant at the moment too."--BBC

 

 

 

 

 

 

 

 


 

 


 

INVESTORS DIARY 2019

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


 

 

 

 

 


Lafarge

AGM

Manresa Club, Arcturus

05 June 2019 , 12pm

 


CBZ

AGM

Stewart Room, Meikles

05 June 2019 , 3pm

 


 

 

 

 

 


 

 

 

 


 

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

 


DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

 


 

 


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