Weakening dollar sends EADS searching for financial solutions

 - November 11, 2007, 7:34 PM

EADS is working out the details of an addition to its Power 8 restructuring plan to cope with the continued decreasing value of the dollar against the euro. Speaking at the European company’s third quarter result conference in Amstersdam, Netherlands, on November 8, EADS CEO Louis Gallois said current hedges are not strong enough to counterbalance the effect on profits.

“Every time the dollar goes down by 10 euro cents, we lose one billion euros in operating result,” he said. In 2007, EADS hedged at 1.37. Previously, “matured” hedges averaged 1.14. On the eve of the show, the euro/dollar exchange rate was close to 1.47. EADS officials anticipate their revenues to decrease “very slightly” in 2007, mainly due to the currency exchange rate.

One solution could involve tapping suppliers and partners for part of the burden. Another, although not on the agenda, could involve further outsourcing by selling more factory sites. “Financial tools” will be used as well, although Gallois would not disclose which tools the company is considering, French finance daily Les Echos reported.

Worker unions reacted strongly. For example, the French CFTC emphasized the atmosphere of uncertainty Airbus employees face since the company entered turbulence a year and a half ago. Power 8 already has been a controversial subject with unions since its inception last year.

EADS claims the initial Power 8 plan is already delivering results–R300 million ($420 million) of annual savings have been secured, CFO Hans Ring said.