Farnborough Air Show

EADS money woes no object for Sogerma

 - November 14, 2006, 11:58 AM

Employees at EADS Sogerma Services’ Merignac aircraft maintenance near Bordeaux in southwest France still have jobs thanks to French Prime Minister Dominique de Villepin. EADS’ top management caved in to De Villepin’s demands that they abandon plans to shut the loss-making facility, agreeing to a temporary reprieve and the salvation of some jobs.

But with EADS facing fresh crises over production and financial troubles at its main Airbus operation, it remains questionable how much longer the firm will be able to accept the cash drain at Sogerma Services, which also produces aircraft components and cabin interiors. The EADS share price took a battering in June when it was forced to acknowledge further delays in A380 deliveries, so the financial community is unlikely to favor a move that appears to put political considerations above the group’s bottom line.

The outlook for the troubled subsidiary has been bleak since its president and CEO, Anne-Marie Perus, reported that losses last year reached ?237 million ($296 million)–a rapid deterioration from the ?39 million ($49 million) shortfall in the previous year and a ?13 million ($16 million) profit in 2003. She pointed to the French defense ministry, which under pressure to cut costs, in 2002 [at which time De Villepin’s UMP party was in power–Ed.] put out to tender the maintenance contract for the French air force’s C-130 transport aircraft. Portugal-based Ogma, now owned by Embraer of Brazil, snatched the contract from Sogerma, which had held it for 15 years. Diversification into refurbishing and outfitting VIP versions of Airbus A319s, A330s and A340s at Sogerma’s Toulouse factory have not been a financial success.

EADS agreed to scale back its closure plan after De Villepin, in a dramatic visit to the Merignac plant called it “unacceptable” and demanded that the “greatest possible number of jobs” be saved. Trade unions asked why the French government, as a 15-percent shareholder in EADS, was not aware of the closure plan. Villepin summoned EADS co-chief executive Noel Forgeard and co-chairman Arnaud Lagardere, whose media conglomerate also owns 15 percent of EADS, to discuss the closure. Lagardere told Villepin that EADS would work to partially save the site, keeping about 500 of its 1,100 jobs.

“I have strong expectations that the defense ministry could and should help [to keep the factory open],” Forgeard said, after meeting the prime minister. Earlier in the day, he had told a radio station that even with government help it would be difficult to keep more than 300 jobs at Merignac. Forgeard indicated that around 950 Sogerma workers would be transferred to other EADS subsidiaries.    –J.A.