Airbus Woes
December 6, 2006
At a conference where he took stock of his first 12 months in office, Thomas Enders, the 47- year-old co-CEO of European arms and airplane concern EADS, called 2006 an “annus horribilis” – a terrible year.
The company needed to account for billions of euros in charges due to delays in its production of ordered A380 super jumbos, as well as a costly miscalculation in its new long-distance jet A350. Also in 2006, several managers resigned, including disputed French co-CEO Noël Forgeard.
Enders said whipping its airplane-making subsidiary, Airbus, into shape would be particularly challenging. “You cannot straighten something out in just a few months, if it took years to mess up.”
More bad news
On Wednesday, bad news hung around EADS like a rain cloud. French newspaper Le Monde reported that an ongoing investigation into possible insider trading at EADS involved more than 800 people. And The Wall Street Journal online edition said German air carrier Lufthansa, hitherto a loyal Airbus client, was to make a firm order for 20 Boeing 747-8 jumbo jets.
Prior to working in industry, Enders was in the planning department of Germany’s Ministry of Defense. In a talk late Monday in Munich, the EADS chief opted for brutally truthful analyses: He acknowledged that a good deal of the problems came from within the company. Airbus had been given too much leeway for years, he said. Some divisions and countries had worked alongside each other without making use of synergies.
In the area of long-haul airplanes, Airbus failed to meet its clients’ needs with its initial design for a new A350 model. “We underestimated Boeing’s 787, and out clients let us know,“ Enders said.
"Marathon ahead"
Development costs for the new A350 are now at 10 billion euros ($13 billion) --- twice as much as originally thought. And the plane will be on the market five years after Boeing’s 787.
“Getting Airbus to be competitive again will be like running a marathon,” Enders told the press on Monday. On the long road, EADS will certainly be looking to its arch rival for some tips – for instance, looking at exactly how Boeing’s restructuring was done, and seeing how useful it was to sell factories.
He admitted that it is difficult to deal with certain topics given the fragile balancing act between French and German owners. Political influences make it difficult to make hard-hitting change in the company.
EADS arose out of the union of German aerospace concern DASA and France’s Aerospatiale Matra. It was meant to take over a pilot function, and lead the way for further inter-European business cooperation. But this has hardly been the case. Advances in creating overarching European business agreements have moved “at a snail’s pace,” complained Enders. Sometimes, things even seem to be moving backwards, he said. Sensitivity to nationality has not gotten less – on the contrary.
Political wasps' nest
“Europe is not very useful when it comes to exploiting synergy potentials,” he said. Political pressure – from both sides – has become a thorn in Enders’ side.
But EADS claims it wants to use ist current problems as an opportunity. Other companies have come out of such a situation stronger, Enders noted. And he noted that aside from Airbus, some other units (defense, aerospace) are successful.