Auto industry backs commitment to fuel economy

US President Donald Trump ordered a review of the Obama administration's decision in January to finalize stiff fuel economy standards for the 2022-2025 period. (AFP)
Updated 19 March 2017
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Auto industry backs commitment to fuel economy

DEARBORN: Just because President Donald Trump may weaken US fuel economy requirements; do not expect gas guzzlers like the giant 13 miles per gallon (mpg) Hummer H1 to make a comeback.
Executives from automakers and suppliers recently gathered at a conference outside of Detroit said looser fuel economy standards might allow for sales of more trucks in areas where they are popular. But otherwise, the pursuit of fuel-efficiency technologies will proceed unabated.
Last week, Trump visited Detroit to announce that his Environmental Protection Agency (EPA) will re-examine gas-mileage requirements that were affirmed in the Obama administration’s last days. Those regulations require the fleet of new cars and trucks to average 36 mpg in real-world driving by 2025, about 10 mpg over the current standard.
Environmentalists warned Trump’s decision could reverse years of reduced tailpipe emissions.
“We are all global companies. We have to design our vehicles to be fuel efficient not only in the US, but in Europe and Asia,” said John Juriga, director of powertrain at the Hyundai-Kia technical center near Ann Arbor, Michigan.
Automakers lobbied Trump hard to get the government to reopen a “midterm review” of the standards for 2022-2025. They say the EPA under Obama rushed out the review just a week before Trump took office, reneging on promises to get industry input. The agency also did not place enough weight on the pronounced consumer shift to sport utility vehicles (SUVs) and trucks, the automakers claim.
The EPA decided the standards are flexible enough to account for the market shift, and that automakers have the technology to meet them. The agency calculated that higher standards would raise vehicle costs by $875, but that would be offset by $1,620 in savings at the gas pump.
Given Trump’s promises to auto CEOs about easing regulations, it is likely the requirements will be weakened when the new review is finished by April of next year. Here is what that means for new vehicles:
Truck and SUV sales likely will keep rising. Auto companies do not expect a major cut in the 36-mpg requirement. But they are hoping for standards that are flexible enough for them to sell more trucks and SUVs without penalties. Lower mileage requirements will let the industry sell more trucks and SUVs in areas like the Southwest, where they are popular. Profits from those sales will help pay for low-margin electric and other efficient cars sold on the West Coast, says Sam Abuelsamid, a senior analyst for the market research firm Navigant. If the standards remain the same and gas prices stay low, the industry contends it would lose money trying to sell efficient cars to people who do not want them.
Like other automakers, Hyundai and Kia have the technology to meet the standards, but the cost has to be weighed against consumer demand, Juriga says.
Paul Nahra, director of the Advanced Engine Group (AEG) for parts maker BorgWarner, says his company sells to automakers worldwide including regions with stricter gas mileage standards. “We need to be pushing the right technology that is going to get broad acceptance,” he says. For instance, China, Europe and Japan will all require fleets to average 47 mpg or higher by 2020.
Work continues on downsizing engines, shedding weight and on new engine technology that makes a gas engine perform like a more efficient diesel. “So far there is no indication there is going to be any backtracking on this stuff,” says Abuelsamid.
Proponents of the Obama standards are not happy. Environmental groups and the states of California and New York took legal action after Trump’s announcement and warned that higher pollution could harm children and senior citizens.


Pace of Saudi Arabia’s private sector sell-off accelerates

Updated 4 min 8 sec ago
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Pace of Saudi Arabia’s private sector sell-off accelerates

  • Aim is to increase the private sector contribution to gross domestic product from 40 percent to 65 percent by 2030
  • The NCP said that the privatization program would save the government around SR35 billion.

DUBAI: Saudi Arabia’s ports, hospitals, desalination plants, schools, and even its sports clubs, are among the candidates for early transfer to the private sector in a program that the government hopes will generate up to SR40 billion ($10.6 billion) in revenue over the next two years.
The National Center for Privatization (NCP), the body responsible for implementing the big state sell-off program, released details of its privatization plan after the Council of Economic and Development Affairs, chaired by Crown Prince Mohammed bin Salman, approved the proposals to increase private sector involvement in the economy — a vital part of the Vision 2030 strategy to reduce oil dependency.
The aim is to increase the private sector contribution to gross domestic product from 40 percent to 65 percent by 2030.
The NCP said that the privatization program would save the government around SR35 billion, add SR14 billion to gross domestic product, and generate up to 12,000 new private sector jobs in the Kingdom by 2020 — the initial phase of the sell-off.
“The scale is very realistic given that privatization is a complex and time-consuming process from a host of perspectives, including regulatory, governance and legal,” said John Sfakianakis, director of economic research at the Saudi Arabia-based Gulf Research Center.
“The estimated amount is equally pragmatic at this stage. These numbers change both due to valuations and appetite as well as economic conditioning with time.”
Other parts of the national economy are also earmarked for some form of privatization under the Delivery Plan 2020. Transport, the renewable energy industry and flour mills are all scheduled in an NCP report that lays out the structure and conditions of the state sell-off program.
“The most important characteristic is the commitment to push ahead with privatization as well as do it in a phased way over the next few years that involves a number of different sectors. There is an evolutionary phase to any privatization process that involves multiple phases over time,” said Sfakianakis.
The King Faisal Specialist Hospital and Research Center, the Riyadh facility regarded as the jewel in the crown of Saudi medical facilities, is named as a subject for incorporation as a prelude to becoming a non-profit organization “to become financially independent and a role model in the health sector and help in achieving its leadership position through focusing on innovation.”

HIGHLIGHTS
- The National Center for Privatization hopes the 2020 privatization program will contribute SR13-14 billion to Saudi Arabia’s GDP.
- Total government proceeds from asset asset sales will total between SR 35 billion.
- Net savings (capex and open) from privatization and PPP projects are forecast to be SR25-33 billion.
- Between 10-12,000 new private sector jobs will be created.
- The privatization program aims to enhance competitiveness, and improve the Kingdom’s business environment through privatizing government services.


Other hospitals will be privatized by the handing over of medical facilities to private operators and the creation of new medical cities, as well as primary care facilities, the provision of rehabilitation services, radiology and laboratory
upgrades.
In a statement, Turki Al-Hokail, chief executive of the NCP, identified other sectors that would be the focus of the privatization plan, including agriculture, housing, energy and Hajj and Umrah services.
“The privatization program aims to enhance competitiveness, elevate the quality of service and economic development, and improve the business environment through privatizing government services,” he said.
The privatization program has been an element of the Vision 2030 strategy since it was launched two years ago, but the latest document sets out a firmer timetable for the sell-off. It identifies “game changers” — businesses that will “receive special attention from the leadership to ensure their successful completion.”
The first three “game changers” are Saudi Arabian ports, the Saline Water Conversion Company at Das Al-Khair and what the NCP calls “opportunity explorers” — structures aimed at facilitating partnership opportunities between the public and private sectors.
The NCP makes clear it is keeping its options open in choosing what kind of privatization is appropriate for a sector: “Full or partial asset sale, initial public offering, management buy-out, concessions or outsourcing” are all under consideration.
Some 100-plus privatization initiatives have been identified across 10 ministries, of which some (including sports clubs, grain silos and desalination) are expected to be completed by 2020.
Jason Tuvey, Middle East economist at Capital Economics, said that the estimate of selloffs were lower than what was possible given the “vast number” of companies that the Saudi state wholly owns or has a controlling stake in.
“Excluding the Aramco IPO, we’ve previously estimated that the government could raise around $25-50 billion from privatizations,” he told Arab News.
The document also makes clear that foreign participation will be allowed in some parts of the program.
The NCP program does not include any assets owned by the Public Investment Fund, the body which is intended to become the world’s largest sovereign wealth fund with assets of $2 trillion by 2030 and which will retain the right to sell the assets it owns in partnership with the government.
The NCP program also does not include residential real estate assets which are unlocked for private sector usage by contractors and real estate developers, and which are covered by the national housing program.
Ministers have said that the overall privatization program could raise as much as $200 billion in sell-of proceeds in the years running up to 2030, but there is no certainty as to how that figure will be reached. In Riyadh last week government officials gave a more conservative estimate of between $50 and $60 billion.
The plan also makes it clear that there is still work to do on the legislative and regulatory framework within which privatization will be pursued. The first of the three “strategic pillars” of the Delivery Plan is the creation of such structures “to enable privatization processes and governance by setting clear and specific procedures that increase the level of preparation and execution of privatization.” Key initiatives remain to be fulfilled in this respect, the document says.
Al-Hokail added: “The privatization program is in the interests of Saudi citizens, will bring many benefits, and improve the investment climate. The program’s strong governance foundation will be a strong pull factor for global investors and large corporations because it sets the guidelines that will make the program attractive.”