Putting EADS Right

When German Chancellor Angela Merkel meets French President Nicolas Sarkozy in Toulouse, the hometown of European plane maker Airbus, on Monday the discussions will include talks on improving the management of its politically-charged parent company, EADS.

It is widely expected that Merkel and Sarkozy will agree to scrap the company's dual management system which sees a French and German executive share the functions of the EADS chief executive and chairman positions.

Many, including the current heads of the company themselves, have blamed this complicated structure, as well as the difficulty of balancing other national interests at the heart of the company, for numerous problems afflicting Airbus.

"EADS has to become a normal company," President Sarkozy said at the Paris Air Show last month, underlining complications caused by the group's unusual management and shareholder structure.

"We agree with the view that a company like EADS can only exist if it has efficient structures," said Merkel at the end of May after a meeting with the French Prime Minister Francois Fillon.

Airbus losses blamed on management structure

Airbus posted a massive loss last year despite delivering a record number of planes, and the company is eager to push through a radical restructuring plan to correct some of the organizational and commercial problems blamed for the poor performance.

The spectacular fall into the red was caused mainly by delays and production problems with the Airbus A380 superjumbo, which is set to enter service later this year, with some of the difficulties blamed on dysfunctional management.

Although a consensus has formed for scrapping the dual management system, neither side is believed to have settled on who would take up which job to preserve the Franco-German balance in the company.

The most likely scenario is that the current French co-chairman of the group, Arnaud Lagardere, would assume the EADS chairmanship on his own, while German co-chief executive Tom Enders would become sole chief executive.

Enders fellow chief executive Louis Gallois, who is also chief executive of Airbus, would remain head of the plane maker and focus entirely on its restructuring plan.

Shareholders also attending summit

The main controlling shareholders in EADS, the German automaker DaimlerChrysler and the French media and defense company Lagardere, will also both attend the meeting on Monday.

The two companies dominate a pact of controlling shareholders that also includes the French state, the Spanish state and a consortium of public and private German investors.

As well as discussing EADS and Airbus, the two leaders will also discuss the troubled European project to produce a rival to the US-owned Global Positioning System (GPS) as well as "the means to improve the economic governance of Europe," said a spokesman for the French presidency.

Sarkonomics likely to feature on agenda

This latter subject could be a source of tension after Sarkozy's frequent attacks on the European Central Bank, which he holds responsible for boosting the value of the euro.

The euro hit fresh record highs against the dollar and yen on Thursday, which penalizes European exporters by making their products more expensive in international markets.

Merkel said Tuesday that she was against orchestrating a fall in the euro and defended the independence of the European Central Bank.

Merkel is also against opening up the shareholders pact to other investors, which Sarkozy favors in order "to finance the launch of new planes and counteract the strong euro," said his spokesman.

A final source of tension on Monday could be demonstrations by disgruntled Airbus workers protesting against the company's restructuring plan, which foresees 10,000 job cuts in the next four years.

The hard-left trade union CGT has called for workers to challenge the plans, dubbed "Power8" by the company.