FT : Report on France’s Renault emissions probe omitted crucial details


Report on France’s Renault emissions probe omitted crucial details
Fears that government might be too lenient because of 20 per cent stake in carmaker

A French government report omitted significant details about how Renault’s diesel cars were able to emit fewer deadly gases when subject to official emissions testing, members of the state inquiry have told the Financial Times.

The inquiry’s report, published last month, concluded that some Renault models emitted nitrogen oxides, a cause of respiratory diseases linked to early death, at nine to 11 times higher than EU limits.

But three of the 17 members of the commission said that the published report did not include the full details of their findings, including the fact that a NOx “trap” in the Renault Captur went into overdrive when the sport-utility vehicle was prepared for emissions testing but not during normal driving conditions.


It was discrepancies between on-road and in-laboratory NOx emissions that first tipped off US investigators that Volkswagen diesels had been installed with illegal “defeat devices” that cheated American tests, triggering billions in fines. A criminal investigation is still under way.

The French commission members said they had no evidence that Renault was using similar devices, arguing only that further investigations should be conducted to find out why the cars performed differently during testing. But the omissions have led members to fear that the government might be too lenient because of its 20 per cent stake in the carmaker.

“The report was ultimately written by the state and they decided what would remain confidential,” said Charlotte Lepitre, an executive of France Nature Environnement, the umbrella group of French environmental groups, who sat on the commission.

Renault denied using software to cheat emissions testing, saying that its models “conform to the laws and norms in each market where they are sold”. Renault recalled 15,000 vehicles in January and has agreed to implement more robust de-polluting technologies as part of a wider “action plan”.

A French environment ministry official denied any intention to hide facts, saying that the government incorporated the commission’s feedback when it consolidated comments from its various members. France’s independent fraud authority is also continuing an investigation into the carmaker’s practices.

But a government official acknowledged the state’s special relationship with Renault, saying: “The government is sensitive to the brand image of the companies it has invested in,” adding that the government emphasised “a positive approach that would push manufacturers in the right direction”.

In its report, the French inquiry, which tested 86 models from a dozen carmakers, determined it had not “proven the use of illegal defeat devices”, but added it “cannot rule out the possibility” without additional investigation.

Renault was not the only manufacturer to fare badly in the probe; the Fiat 500x registered NOx emissions almost 17 times EU limits.

But commission members said the Renault evidence was among the most troubling.


The Renault Captur’s NOx trap purged five times in rapid succession at the end of scripted test preparations © AFP
The Renault Captur’s NOx trap purged five times in rapid succession at the end of scripted test preparations, allowing the car to produce much lower emissions than on the road, said the commission members, several of whom asked for anonymity.

This suggested that the car’s software could have detected that a test was being performed, they said.

“Everything in a car is controlled by software now,” one commission member said. “We can’t be sure that Renault’s software detected the test [like Volkswagen’s] per se, but it seems that Renault has optimised the NOx filter to target this very specific set of conditions.”

Members of the commission were also concerned about the emissions controls that recirculate exhaust to filter out pollutants. Renault’s cars had been programmed to shut off the device once air temperatures under the hood exceeded 35C, a temperature that sources said would be frequently surpassed during normal driving.

Such temperature-related shutdowns are permitted by EU law in order to prevent engine damage, a point that many carmakers have made to justify similar cut-offs.

But commission members said that Renault implicitly admitted that the temperature cut-off was unnecessary for engine health by agreeing to recall models to recalibrate it through a software update.

“If Renault can change these features without modifying the hardware, how can they argue that the engines weren’t stable without them?” one member asked.

The government’s report mentioned Renault’s emissions controls being “too restrictive” in terms of temperature and speed.

“It is only regrettable that Renault didn’t consider the environmental impacts of these settings … which were no longer justified [in later models],” the environment ministry said.

>>> US Close Dow -0.12% S&P -0.06% Nasdaq +0.12% Russell+0.24%

Closing Market Summary: Stocks Slip as Oil Prices Fall

The stock market endured a choppy start to the week, but the S&P 500 (-0.1%) finished its day little changed. Equity markets exhibited a slight degree of caution as participants ruminated over recent commentary from central bankers and looked ahead to the Kansas City Fed's Economic Symposium in Jackson Hole, Wyoming. Fed Chair Janet Yellen is slated to speak Friday at 10:00 ET.

Fed Vice Chair Fischer struck a somewhat hawkish tone over the weekend when he stated that the U.S. economy is close to hitting employment and inflation targets. The upbeat view on the U.S. economy had some participants question whether Mr. Fischer would advocate for at least one fed funds rate hike before the end of the year. The implied probability of a rate hike at the September meeting, as measured by the fed funds futures market, rose to 18.0% from 12.0% on Friday. The odds of a rate hike at the December meeting increased to 53.5% from 46.2%.

The prospect of a policy divergence trade was entertained overnight when Bank of Japan Governor Haruhiko Kuroda talked up the potential for the central bank to cut interest rates further into negative territory. However, that view appears to have been slightly discounted throughout the session. The dollar/yen pair ended higher by 0.1% (100.31) after jumping to the 100.90 level overnight.

The S&P 500 (-0.1%) maintained a narrow ten-point trading range after falling to its 20-day simple moving average (2176.51) at the start of the session. Other focal points impacting today's trade included a downturn in crude oil futures and sector leadership from the heavily-weighted health care (+0.1%) space. Six sectors ended in the red with commodity-sensitive energy (-0.9%) rounding out the leaderboard. Conversely, defensively-oriented consumer staples (+0.1%) health care (+0.1%), and utilities (+0.3%) outperformed.

Biotechnology demonstrated relative strength in the health care sector, evidenced by the 2.0% gain in the iShares Nasdaq Biotechnology ETF (IBB 296.01, +5.70). The group moved higher after Medivation (MDVN 80.42, +13.26) agreed to be acquired by Pfizer (PFE 34.84, -0.14) for $81.50 per share in cash. Separately, Valeant Pharmaceuticals (VRX 31.27, +2.53) spiked 8.8% after announcing that Paul Herendeen would assume the role of Chief Financial Officer. Conversely, Dow component Johnson & Johnson (JNJ 119.13, -0.79) ended lower by 0.7%.

The influential technology sector (-0.1%) finished in-line with the broader market as top-weighted Apple (AAPL 108.51, -0.81) weighed. The stock declined 0.8%, trimming its post-earnings rally to 12.3%. Fellow large cap Facebook (FB 124.15, +0.59) jumped 0.5% after receiving positive commentary in Barron's. Separately, Intersil (ISIL 18.74, +3.10) outperformed among chipmakers after reports indicated that Renesas Electronics interested in acquiring the company.

The Dow Jones Transportation Average (-0.5%) ended behind the benchmark index as airlines underperformed. American Airlines (AAL 36.00, -0.49) weighed on the sub-group, declining 1.3%.

WTI crude finished the day lower by 3.4% ($47.42/bbl; -$1.65) amid concerns regarding the extent of the recent oil rally. The energy component was also under pressure after it was reported that Iraq is preparing to increase its oil exports by approximately 150,000 barrels per day.

Relative strength among long-dated Treasuries led to some flattening in the yield curve. The yield on the 30-yr bond slipped five basis points (2.24%) while the yield on the benchmark 10-yr note fell four basis points (1.54%).

Today's participation was below the recent average as fewer than 685 million shares changed hands at the NYSE floor.

There was no economic data of note released today.

Tomorrow's economic data will be limited to the New Home Sales Report for July (consensus 580k), which will be released at 10:00 ET.

  • Russell 2000 +9.1% YTD
  • S&P 500 +6.8% YTD
  • Dow Jones +6.3% YTD
  • Nasdaq Composite +4.7% YTD

>>> The government is readying a post-Brexit vote housing package that will prov


The government is readying a post-Brexit vote housing package that will provide billions of pounds to residential developers in an attempt to abate the housing crisis and stimulate the flagging economy.

HOMENEWS
Government prepares multi-billion pound housing stimulus
22 August 2016 | By Samuel Horti

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The government is readying a post-Brexit vote housing package that will provide billions of pounds to residential developers in an attempt to abate the housing crisis and stimulate the flagging economy.

best pic of the Palace of Westminster 636 resized
It is understood that the new multi-billion pound fund, administered through the Homes and Communities Agency (HCA), will back developers from all parts of the industry, including the private rented sector (PRS).

Small and medium-sized enterprises (SMEs) will be in pole position to receive the money, which will be made available in the form of loans, as will developers using modular construction to build out schemes.

A source familiar with the plans said the all-encompassing fund would also support the assembly of complex sites around the country, and would be used to give financial guarantees to developers worried about the risks of delivering big schemes.

The final details of the fund – which the source said would comprise new money – are currently being thrashed out at the top level of government and are likely to be announced in the Autumn Statement.

Government to take on more risk than ever before
It will mark a shift in attitude from the government to development: it is now willing to take on more financial risk than it has ever done in the past to tackle the ever-deepening housing crisis.

Housebuilders are known to be stepping away from land acquisitions in the wake of the Brexit vote and hesitating on fresh projects – bringing the need for alternatives into sharper focus – and well-placed sources acknowledge that the government understands the need to diversify supply.

Off-site construction has moved to the top of the government’s agenda since the Brexit vote alongside PRS, as ministers seek ways to address the ever-widening gap between housing supply and demand.

Property Week revealed last week that ministers were gearing up to use modular construction to tackle the housing crisis.

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance
: AVH +3.3%

M&A news:
  • MDVN +19.7% (confirms deal to be acquired by Pfizer (PFE) for $81.50/share in cash, or ~$14 bln)
  • SYT +10.7% (Syngenta and ChemChina confirm regulatory clearance for M&A deal from Committee on Foreign Investment in the United States)
  • SSY +9.9% (subsidiary sells Chestatee Regional Hospital in Dahlonega, Georgia for ~$15 mln)
Other news:
  • BPMX +34.6% (announces final phase 2a trial results; BPX-01 reduces facial P. acnes by more than 90% in four weeks)
  • CYCC +16.2% (Tang Capital discloses 9.6% passive stake)
  • RLJE +14.3% (enters into investment agreement with Digital Entertainment Holdings LLC, a wholly owned subsidiary of AMC Networks (AMCX))
  • VRX +3.4% (confirms former Zoetis (ZTS) CFO Paul Herendeen will replace Robert Rosiello as CFO effective immediately)
  • BMRN +3.3% (in sympathy with MDVN), GEO +2.4% (slightly rebounding following last week's 29% decline)
  • CXW +2.2% (slightly rebounding following last week's 30% decline)
  • FMS +1.8% (issues statement regarding Centers for Medicare & Medicaid Services request for information)
  • MON +1.2% (in sympathy with SYT)
Analyst comments:
  • VNCE +6.6% (upgraded to Overweight from Neutral at Piper Jaffray)
  • CSII +1.8% (upgraded to Outperform from Mkt Perform at Leerink Partners)
  • LB +1.2% (upgraded to Buy from Neutral at Goldman)
  • HRL +0.9% (upgraded to Outperform from Neutral at Credit Suisse)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance
: DRD -15.8%

M&A news: PFE -0.5% (Medivation confirms deal to be acquired by Pfizer for $81.50/share in cash, or ~$14 bln)

Select metals/mining stocks trading lower:
  • SSRI -4.3%, CDE -4.2%, SBGL -4.1%, PAAS -3.6%, AU -3.3%, GOLD -3.1%, HL -2.7%, AUY -2.7%, FCX -2.5%, HMY-2.2%
  • SLW -2.2%, BHP -2.1%, RIO -2.1%, SLV -2%, BBL -1.8%, NEM -1.5%, X -1.3%, CLF -1.3%
Select oil/gas related names showing early weakness:
  • WLL -3.6%, CRC -3%, CHK -2.8%, OAS -2.6%, STO -2.3%, PBR -1.9%, TOT -1.6%, RDS.A -0.9%
Other news:
  • AGIO -9.3% (still checking)
  • SITO -4.5% (files mixed securities shelf offering)
  • XBIT -1.9% (files for 7 mln share common stock offering)
Analyst comments:
  • WDAY -2.2% (downgraded to Hold from Buy at Needham)
  • URBN -1.4% (downgraded to Neutral from Buy at Goldman)
  • MFRM -0.5% (downgraded to Underperform from Mkt Perform at Raymond James)

>>> Sanofi said to weigh alternative deals to Medivation; eyes BioMarin pharmace

Sanofi said to weigh alternative deals to Medivation; eyes BioMarin pharmaceutical - sources - part 2
Tuesday, 23 August 2016, 8:35 pm
Hacks at the FT last night landed a rather good scoop about Pfizer winning the long running Medivation auction with a $14 billion takeover bid. Here is the link:
The story has not yet been confirmed but it's written pretty hard and been followed by other "newspapers of record", so I would be surprised if it wasn't announced later today.
The key question now is: what will Sanofi do next?
The French drugs giant aggresively pursued Medivation since the beginning the year but, in case you don't recall, a couple of months ago I wrote that the French pharmaceutical group was also looking at BioMarin Pharmaceutical as a back up target should it lose out in the auction. Here is the link:
- See more at: http://www.betaville.co.uk/news/sanofi-said-to-weigh-alternative-deals-to-medivation-eyes-biomarin-pharmaceutical-sources-part-2/#sthash.rxT10gYD.dpuf

>>> Teleperformance to acquire LanguageLine Solutions from ABRY for about USD 1.

Teleperformance to acquire LanguageLine Solutions from ABRY for about USD 1.5bn
Teleperformance (Paris:RCF), the worldwide leader in outsourced omnichannel customer experience management, today announced that it has entered into a definitive merger agreement to acquire LanguageLine Solutions LLC from ABRY Partners and minority equity owners.

LanguageLine Solutions is the US market leader in over-the-phone and video interpretation solutions to a wide range of organizations in the healthcare, insurance, financial services, communications and government sectors. Founded in 1982 and headquartered in Monterey, California, LanguageLine Solutions had revenue of USD 388m and adjusted EBITDA of USD 147m in 2015.

Daniel Julien, Executive Chairman of Teleperformance, and Paulo César Vasques, Teleperformance Chief Executive Officer, commented: “LanguageLine Solutions delivers mission critical services to a large array of clients in verticals that we already service in customer service and technical support. It is a superb organization that supports 25,000 clients across the US, Canada and the UK in more than 240 languages with a sophisticated growing network of approximately 8,000 interpreters. This acquisition will reinforce and boost Teleperformance’s global leadership as a provider of high end value-added services, and will positively impact Teleperformance’s profitability profile. We intend, together with LanguageLine Solutions’ seasoned leadership team, to gradually expand these lines of service across Teleperformance’s geographic footprint.”

“When completed, the deal will create immediate value for Teleperformance shareholders as it is expected to be accretive to earnings per share by around 10% on a pro forma basis for 2016”, they added.

Peggy Koenig, Managing Partner and Co-CEO at ABRY Partners, said: “LanguageLine has been a long-held and important investment for ABRY. Management has grown revenue, diversified the product lines and increased profitability meaningfully over the course of our investment, and we are thrilled that the Company has found a perfect home within Teleperformance. We wish the management team and Teleperformance continued success going forward.”

“I would like to heartily thank ABRY Partners for having been such great shareholders, supporting LanguageLine’s mission of enabling communications in order to empower relationships as well as our aggressive growth strategy. We know that Teleperformance, with its global culture and footprint, is the perfect partner to help us write a great new chapter in the history of the language access solutions industry. The LanguageLine leadership team is excited to join the Teleperformance group in order to expand the reach of our business and to help us to continue to provide total and complete client satisfaction”, added Scott W. Klein, LanguageLine Solutions Chief Executive Officer.

The consideration for the transaction will be USD 1.522bn at closing. The acquisition will be fully financed through a debt financing provided by Crédit Agricole, HSBC and Société Générale. Paul Hastings LLP and Linklaters LLP acted as legal advisors to Teleperformance in conjunction respectively with the acquisition and the financing.

Credit Suisse and Morgan Stanley acted as financial advisors to LanguageLine Solutions on the transaction and Kirkland & Ellis LLP acted as legal advisor.

The transaction is expected to close before year end, subject to receipt of certain regulatory approvals and other customary closing conditions.