Paris Air Show

Airbus struggles to right itself

 - June 17, 2007, 9:18 AM

The next 30 days or so will be critical to the future of Airbus and its EADS parent company as top executives struggle to push through the core elements of the European airframer’s Power8 restructuring plan. The toughest challenges hinge on the outcome of high-level political horse-trading between Nicolas Sarkozy, France’s new president, and his German counterpart, Angela Merkel, and also on uncomfortable negotiations that have to be held with trade union officials over the target of shedding some 10,000 jobs at Airbus.

But here at the Paris Air Show this week, much of the dialog will likely focus on Airbus’s relations with its suppliers as it strives toward its goal of reducing the number of firms it deals directly with, from around 3,000 to just 500, and achieving a 10-percent cut in the cost of doing business with these vendors over the next 12 to 18 months. Earlier this month, the company unveiled a transnational corporate structure that involves key suppliers and partners more closely in all aspects of program development and production, as well as a new Charter Commitment agreement to underpin Airbus’s new relationship with these companies.

The suppliers who visit EADS here at Le Bourget won’t be able to say that the group isn’t doing its bit to economize because the traditionally large and separate show chalets for EADS, Airbus and Eurocopter have been scrapped in favor of a more modest single structure.

At an EADS media seminar in Paris on Friday, Airbus president and CEO Louis Gallois confirmed that by the end of July he wants to reach agreement in principle over the sale of three factories in France, Germany and the UK, and on new investment by partner suppliers at several other Airbus plants. “Reorganization [of management] is already in progress….so we’re not just waiting for the social issues to be resolved,” he said, referring to the protracted negotiation process now taking plans with unions in France, Germany, the UK and Spain. 

One thing you won’t see in the downsized EADS chalet at Le Bourget are any national flags. Gallois admitted to reporters at a late April press briefing that he is sick of seeing French, German, Spanish and British flags used to illustrate the locations of company sites in presentations and he has told managers in blunt terms that nationality is a completely taboo consideration in all future management decisions. “The most important thing is that we have an integrated management that is not based on nationality. I don’t want to see flags on charts. I only know Airbus guys,” the new Airbus boss declared. Gallois has also demanded a much greater transparency in the way Airbus communicates both internally and externally. “We have suffered from the good news disease in which people try to hide bad news,” he reflected.

“We need to look at the next decade and not to our personal short-term priorities.

“And we need a serene management that is not in the newspapers every day,” said Gallois in what many took to be a thinly veiled swipe at his predecessor Noel Forgeard, who was forced out of office a year ago after the full extent of serious problems with the A380 airliner program was revealed. Controversially, he walked away with an ?8.5 million ($11.5 million) payoff. Just last week EADS’s head of international strategic development, Jean-Paul Gut, also resigned suddenly in a disagreement over the Power 8 restructuring. He too received a substantial parachute payment of ?2.8 million ($3.8 million).

This morning France wakes up to a new parliament that is widely expected to be run by a strong right-wing majority likely to back Sarkozy’s pledges to reform French labor law and working practices. French aerospace executives gathering here at the Paris show this week have privately told Aviation International News that they are thrilled at the prospect of the new president tackling what they regard as uncompetitive practices, such as the mandatory 35-hour working week.