Edito : A Soft Landing

Edito

A Soft Landing

by Robert ASSADOURIAN

The Airbus crisis surprised the non-initiated to which we belong. Indeed, how can one explain that the aircraft manufacturer is in turbulence when the French-German company has a most prosperous production and order book? The triumphant launching of the A380 in 2006 is still alive in everyone's memories.

The origin of the crisis is related to difficulties known for a long time by the initiated but hidden from the others. Are the Frenchmen incapable to bear realities ? Where are those responsible who purposely delay their revelation ? There is no query about the excellent quality of the planes and it seems that the origins of the crisis are elsewhere.

Airbus is an industrial puzzle scattered throughout the world, which employs 57.000 employees and relies on 30.000 subcontractors. Furthermore, it is composed of a somewhat irrational federation of constructors who operate on 16 sites in Europe without constituting an integrated company. The industrial dysfunctions, the financial crisis and that of the French-German couple, and the social plan are all detonators.

The foreseen financial commitment of EADS amounts to 5 billion euros of additional cost for the A380, and to 11 billions for the development of the A350. The overestimation of the euro in relation to the dollar comes in addition. The computer decisions and the incapacity to supply electric cables are errors of the Hamburg factory, which cost 5 billion euros. Hamburg is the sole responsible for the blunder but financially it is covered by the group !

The Germans asked for the realization of the central box of A350 for which they have no know-how and which was refused. However they obtained the transfer of a part of the A320 construction to Hamburg where they are obliged to set up the production line, whereas Toulouse remains limited to 14 aircraft per month and everything is ready there to double the production. What is the explanation ?

The managerial crisis is registered in the birth certificate of EADS. If only the economic criteria had been retained in 1999, the French could aspire to 62 % of the total. However, for political reasons it is the parity which was retained. Consequently EADS is controlled in parity by two blocks : on one hand by the French shareholders, the State and Lagardère, and on the other hand the Germans with Landers, state-cities, public banks and Daimler-Chrysler. Parity is a political notion that should have been wiped out by efficiency and competence. Unfortunately, it placed EADS under French domination.

During the launch of the innovative and even revolutionary projects of the A380 and A350, no initiative was taken for remodelling the industrial structures that were conceived for the aircraft of the previous generation. Nevertheless, today Airbus delivers a plane a day against one a month 30 years ago ! Following the example of Renault or Volkswagen among which 70 % of the added value were externalized, Airbus must recentralise its activities on the heart of the profession, which is the conception and the final assembly of planes. Airbus subcontracts 25 % of its activity against 80 % for Boeing and Embraer !

Up to 2006 Airbus is presented as the symbol of a Europe that wins. But the stock market crash of 2006, the shareholders' disengagement, the dismissals of the management and the return of Boeing make the drastic Power 8 plan presented by Louis Gallois a necessity. Strategic, technical and structural errors can only be corrected by a restructuring plan, which seems unfair for those who are afflicted by it. Boeing, which has undergone a profound reorganization since 2001, has become again the world n°1 in 2007.

Airbus lacks stockholders' equity. It is financed by the State which grants refundable loans, which avoids a recapitalisation that is necessary for the launch of new programs. Indeed, Lagardère, Daimler-Chrysler, although they are minority shareholders, hold all the power in the company, but do not invest because it is not a part of their strategy. More discreet, the Americans massively help Boeing by means of state commissions, especially military, which finance research that could then benefit to the private sector.

The consensual and diplomatic Louis Gallois has to apply the plan conceived by the manufacturer Christian Streiff, which firstly implies an industrial reorganization.

Transform Airbus into a true totally integrated group possessing specialized factories and big subcontractor partners.
Externalize 50 % of the activity for the new A350.
Attract motivated shareholders, and make an independent company with a true Boss to achieve its objectives
Airbus must no longer be the theatre of divergent national interests.

Today it is necessary to resolve the difficult human problem because austere social movements risk damaging the beautiful image that workers, technicians and managers built.

The trade unions feel frustrated and are opposed to the reduction of the workforce. They suffer the economic situation and do not understand the division of EADS wanted by the politicians. The German Chancellor and the French President, encircled by 10,000 layoffs and the rumbling discontent of syndicates, have seized the file. Airbus, whose order book contains 2589 planes, has a workload assured for several years. It has the means to face the crisis. However, realism instructs him to make a soft landing, without too much breakage. The future of 10,000 people and that of the European construction are at stake.