Archives for April 3, 2019

In the auto industry, it’s pretty well known that if you don’t revamp your vehicles every few years, buyers will flee to companies with newer models.

Ford learned that lesson again with its Escape compact SUV, which just six years ago was the second-biggest player in the fastest-growing part of the U.S. market. In 2013, the Escape captured just over 16% of all compact SUV sales with nearly 296,000 leaving the lot, beaten only by Honda’s CR-V.

But by last year, as the current outdated version of the Escape hit its sixth model year in what has become the largest vehicle segment in the U.S., its share had tumbled to just 6%. The company is counting on an all-new version of the SUV due out in the fall to reverse that trend.

To be sure, the competition has heated up. Six years ago there were only 17 compact SUVs available nationwide. That has nearly doubled to 30 this year, according to LMC Automotive, a forecasting firm.

“In this competitive environment, new product wins,” said Jeff Schuster, a senior vice-president at LMC.

The 2020 Escape gets four new engine-transmission combinations including a plug-in gas-electric hybrid that can go 30 miles on electricity. There’s also a conventional hybrid and two turbocharged four-cylinder engines mated to eight-speed automatic transmissions.

The new Escape, unveiled Tuesday, is sleeker and appears more aerodynamic. It’s shed 200 pounds because Ford is employing more light, high-strength steel. It also has sliding second-row seats for more legroom. Price and gas mileage have not been released.

It’s going up against new market leaders including last year’s top-selling Toyota RAV4, the CR-V, Chevrolet Equinox and the Nissan Rogue. All have been revamped in the past few years in a segment that has replaced the midsize car as America’s most popular vehicle in 2015.

If Ford neglects to update the Escape again for an extended period of time, it risks losing an even greater share of a U.S. market that only continues to grow. LMC projects compact SUV sales will rise 7.4 per cent over the next five years, to more than 3 million annually.

“There’s going to be a pretty pronounced push from other manufacturers into this segment, because this is the No. 1 segment,” Schuster said.

Oilsands producer Cenovus Energy Inc. is recommending investors at its annual general meeting vote against a shareholder motion requiring it to set greenhouse gas emission targets aligned with the goals of the Paris climate accord.

The proposal by the Fonds de Solidarite des Travailleurs du Quebec would force Cenovus to set medium- and long-term targets for its direct and indirect methane and other GHG emissions from operations.

The text of the motion in a filing ahead of its April 24 meeting suggests that Cenovus has backed away from a 2016 pledge to reduce the intensity of its total upstream GHG emissions by 33 per cent by 2026.

The Quebec investment fund is one of the co-filers of a similar proposal at American oil company ExxonMobil this year.

In its response, Cenovus says the request is “overly demanding” because achieving the Paris goal of limiting the global average temperature increase to less than two degrees Celsius relative to pre-industrial levels will take an integrated national and global level plan.

It says it agrees with the spirit of the motion but not its approach, adding it has cut per-barrel GHG emissions at its oilsands operations by about one-third since 2004 and is subject to Alberta oilsands and methane emission reduction regulations.

“We believe that the right approach for Cenovus is to focus on its environmental performance measures, including GHG emissions intensity, based on business plans for disciplined growth and the capital allocation priorities that the company has committed to its shareholders,” it says.

Environment Commissioner Julie Gelfand says Canada is not doing enough to combat climate change.

Gelfand delivered her final audits Tuesday before her five-year term expires, looking at fossil-fuel subsidies, invasive aquatic species and mining pollution.

But her final conclusions as the country’s environmental watchdog say it is Canada’s slow action to deal with the warming planet that is most “disturbing” to her.

“For decades, successive federal governments have failed to reach their targets for reducing greenhouse-gas emissions, and the government is not ready to adapt to a changing climate,” she said in a statement Tuesday morning. “This must change.”

Gelfand’s rebuke came a day after Environment Canada scientists sounded an alarm that Canada is warming up twice as fast as the rest of the world, causing irreversible changes to our climate.

Gelfand said neither Liberal nor Conservative governments have hit their own targets to reduce greenhouse-gas emissions.

Canada is not on track to hit its 2030 target, despite policies like the national price on carbon that took effect this week.

Canada is still an estimated 90 million tonnes of annual carbon-dioxide emissions shy of its stated goal to cut emissions to 70 per cent of what they were in 2005 by 2030. The United Nations Intergovernmental Panel on Climate Change, however, suggests Canada’s commitment is more than 100 million tonnes shy of what is needed — the equivalent of what 28 million passenger cars emit in a year.

Gelfand’s audit says the Liberals are not keeping a promise to get rid of “inefficient” fossil-fuel subsidies, which are undermining efforts to combat climate change, encouraging wasteful consumption of fossil fuels and discouraging investments in cleaner energy sources.

She concludes that both Finance Canada and Environment Canada have defined “inefficient” so broadly they can’t decide what subsidies fall into that category.

Finance Canada’s work on the subsidies focused exclusively on fiscal and economic considerations without giving any attention to the social and environmental issues at play. For its part, Environment and Climate Change Canada only looked at 23 out of more than 200 federal organizations when it compiled an inventory of potential subsidies for the fossil-fuel industry, Gelfand found.

Environment groups are sharply critical of Canada’s continued aid to the fossil-fuel sector, particularly when cleaner energy sources and technologies are not getting at least equal treatment. Canada has pledged to eliminate inefficient subsidies by 2025 as part of both the G20 and G7 economic groups of nations, and the Liberals also campaigned on a promise to get rid of them.

This is the second attempt to audit Finance Canada’s fossil-fuel subsidy programs. In 2017, the auditor general made an attempt but was blocked when the department refused to cough up the needed documents. Eventually the department gave in, resulting in the audits released Tuesday.

Bank of Montreal’s chief executive Darryl White says economic growth in Canada is “moderating” but it’s “no screeching halt” and the risk of a recession in the coming year is relatively low.

White said Tuesday that he estimates that by the back end of this year, the country’s GDP growth will be in the range of 1.5 per cent.

“Are we experiencing some slowdown? Yes, but let’s pay attention to the rate of change… It’s moderating, it’s not a screeching halt,” he told reporters after BMO’s annual meeting of shareholders.

“And when we look at employment rates, we look at inflation, they don’t line us up to driving ourselves towards a recession.”

White’s comments come after an analyst and short sellers recently heeded caution about the Canadian banking sector.

Veritas analyst Nigel D’Souza said in late March that the Big Six banks’ latest quarterly earnings were “underwhelming” and cautioned that the sector is likely facing an “inflection point” in the credit cycle. He said investors should reduce exposure ahead of “an acceleration of credit losses.”

As well, Steve Eisman, a senior portfolio manager at Neuberger Berman in New York, who was featured in the book and film The Big Short, recently reiterated his bet against the big Canadian banks, pointing towards the real estate sector.

On Tuesday, White told shareholders and other annual meeting attendees that while BMO has seen some moderation in Canadian consumer loans and mortgages, this was both “healthy and expected” and credit quality continues to be “very good” in these consumer portfolios.

He added in his speech that BMO remains confident in its medium-term target of earnings-per-share growth of seven to 10 per cent.

While the performance of each housing market in Canada varies, there continues to be net growth, White told reporters.

He said British Columbia, Saskatchewan and Alberta are seeing some weakness, while Toronto’s market is “steadying” and the markets in Southern Ontario outside of Toronto, along with Ottawa and Montreal, are strong.

“You really have a diverse set of circumstances when you go across the country… On a blended basis across Canada, are we going to see a slowing consumer mortgage portfolio? For sure, relative to what we would have seen last year or the year before. But still growing,” White told reporters.

In response to the growing rhetoric targeting Canadian banks and the real estate sector, White noted that BMO’s mortgage book is 44 per cent insured, and the uninsured portion has a more than 50 per cent loan-to-value ratio. And, among its peer group, BMO has the lowest exposure to the Canadian housing market, he added.

“I don’t lose sleep over this question, personally… I think the market is a lot healthier than some people think it is.”