Friday, February 16, 2007

Airbus, so what happens next?

I understand that this week there was a general board meeting of Airbus Industries. At that meeting the executives were presented with a plan to save the troubled European National Champion. These plans, called Power8 should be made public on Tuesday next week. I also understand they won't be.
Airbus needs to save over 1 billion Euro a year.

The plan was, I was told to lay off all contract staff, which would mean thousands of job losses across the EU, in particular in France, Germany, Spain and the UK. Of course if this was a business in the normal fashion the executives would have hummed and haahed about the severity of the measure, then looked at the hatchet face of the CFO, gritted their teeth and accepted this as the only way to save the company. But of course Airbus is not a normal industry. It is industrio-political. It is the EU's champion in the great joust with the US and Boeing.

So the suggestion was taken off the table. Essentially the four Governments had made it clear that they wouldn't complete any orders with Airbus if their own contract workers were sacked.
Economics Minister Glos said before the talks that he wanted to ensure that Germany was not hit disproportionately by any job cuts, and repeated his warning that German defence orders for Airbus parent company EADS could be cancelled.

Now what? Well as far as I can gather the Board is in a tight spot. It knows that they have to do this, but politically they cannot. The upshot is probably that they will just slowly sink into the sand.

The other possibility is that we will witness a round of governmental chicken, with the first to blink to see redundancies. Any betting that Bristol is doomed?

1 comment:

Anonymous said...

It has been my experience that whenever politics collides with reality, reality wins.

Airbus has made some extremely bad decisions, the worst being to go into the A380 business at all. Having committed to that error, however, they should have known that they were risking their existence on that bet, and at a minumum, ensured that all of the design bureaus were at least using the same CAD program/revision.

The A380 looks, right now, like it will be the sort of triumph the Concorde was, something that will be produced for bragging rights, but will never be economically viable. Airbus's assessment of the break-even number is now close to 80% of what they regard as the total market for that type aircraft, a market estimate that most people believe is wildly optimistic.

But the second problem was even worse. They delayed challenging Boeing in a market that was not just far more lucrative, but was where they didn't even necessarily need to get a majority of the orders to prosper. And now they are trapped in lag against the dreamliner, with even the most optimistic dates for the rival A350wide-body being nearly a decade after Boeing gets their aircraft on the market...and considering the capital shortfall Airbus has...because of the penalties they are paying and profits they are forgoing due to the long delayed A380, actually getting the A350 to market will likely be delayed even more than a decade.

And if that wasn't bad enough, all of their statements about how the world really wasn't ready for an all composite fuselage which their marketing people were throwing around, back before they resigned themselves to the inevitable redesign of the A350 to an all composite fuselage are going to come right back to haunt them in their marketing.

So from a strictly business standpoint, Airbus is in deep deep trouble, even BEFORE you consider the forced inefficiencies of playing multinational politics.

Airbus may well not least not as a viable competitor to Boeing.