What's wrong at Airbus? Will the A380 sink the ship?

[Spiffor]

Originally posted by Oerdin
Just another example of why governments should not be allowed to own companies. The politicians want to run things for their own personal political gain rather then what is the best thing to do as a business.

Funny, Daimler Chrysler was opposed to Streiff's call for greater autonomy. I must have missed the memo that Daimler Chrysler was a government agency.

[DanS]

I can't believe that you're buying the "Streiff's restructuring plan will be kept" line of BS. It's just doublespeak. If the program were to be kept, then Streiff would still be CEO.

Meanwhile, Gallois is spouting the opinion that the company's problems are due to the weak dollar. How can he say status quo ante any more clearly?

OTOH, he's used to manage companies with close ties with the French government.

Close ties? They were owned by the French gov't.

[pchang]

Clearly

wiring problems are a result of the weak dollar. This is because dollars were used instead of wires and fiberoptic cables due to their lighter weight. But with the dollar weakening, they are breaking all over the place.

[DanS]

I wonder whether the wiring problem is fixable without making major mods to the entire aircraft, or whether they will have to switch back to copper wiring. The solution to the wiring problem (or the fact that a solution is in hand) hasn't really been mentioned in all of the tumult.

[pchang]

On a personal note

I was working on a decent sized deal to sell them stuff to support the roll out of the A380 to their customers. Now, that deal is off the table. Airbus incompetence is costing me thousands of dollars

Plus, some nice guys I was working with in Toulouse may be in trouble

[Spiffor]

Originally posted by DanS
Close ties? They were owned by the French gov't.

Well, so is EADS

[VetLegion]

I agree with Pekka. This Airbus business is causing untolerable delays of the dog brain chip programme!

Scrap the planes and give us dogs that can play mp3

[DanS]

Here's what Airbus' largest customer for the A380 is saying about the "restructuring" of Airbus. From the WSJ...

October 11, 2006

Airbus Chief Vows
To Stick to Revamp,
Warns of Job Cuts
By DANIEL MICHAELS
October 11, 2006; Page A13

PARIS -- New Airbus Chief Executive Officer Louis Gallois pledged to pursue the restructuring plan developed by his predecessor, warning of "painful" job cuts ahead.

But a day after Christian Streiff resigned amid conflicts with main Airbus parent European Aeronautic Defence & Space Co., airline customers still fear political meddling could hurt the plane maker's efforts to become a reliable, cost-efficient supplier and strong rival to Boeing Co.

EADS "had no stomach for [Mr. Streiff's] recovery plan, which he saw as the only solution to the structural problems besetting Airbus," said Tim Clark, chief executive of Dubai's Emirates Airline, in an email. Emirates is the largest buyer of Airbus's A380 superjumbo jetliners and one of Airbus's biggest customers.

"What you see here is the private sector losing out to the public sector, which does not bode well for the company, given the magnitude of the problems," Mr. Clark said.

Moving to quell such fears, Mr. Gallois said he will immediately push ahead in making the structural changes Mr. Streiff had advocated. "There will be no difference in the plan," Mr. Gallois said on Europe 1 radio.

The management overhaul comes as Airbus already faces delays on the A380, rising costs from the weak U.S. dollar -- the international currency for pricing jetliners -- and a strategic decision on whether to begin building a new model of jetliner, the A350 XWB. Mr. Gallois yesterday backed plans for the A350 XWB, Airbus's response to Boeing's 787 "Dreamliner."

Mr. Gallois, who also remains co-chief executive of EADS, became the third CEO of Airbus in 15 months Monday. EADS owns 80% of Airbus and will imminently buy the remaining 20% from BAE Systems PLC of Britain.

EADS shares rose 3.6% yesterday in Paris, to close at €20.89 ($26.32). But credit-rating firm Fitch Ratings late yesterday downgraded EADS's debt, saying corporate-governance issues at EADS are "inherent weaknesses within the group."

Mr. Streiff, officials at EADS and its main shareholders all said the resignation was due to conflicts between Mr. Streiff and his bosses over the Airbus CEO's independence in implementing the restructuring plan and over the plane maker's corporate governance, not over EADS's willingness to restructure Airbus.

The restructuring plan aimed at tackling these problems -- in part via job cuts and plant closures -- has sparked criticism from Airbus's labor unions, though specifics on cuts haven't been disclosed.

Mr. Gallois also will have to persuade customers Airbus is committed to change. Many outsiders believe Mr. Streiff's departure is a sign EADS didn't want to move aggressively to make the plane maker more efficient -- particularly by shedding a longtime approach of spreading labor across Europe, often at the expense of profit and efficiency.

Many Airbus customers worry the company is so distracted it might shelve work on the A350 XWB, which is a vital part of the plane maker's product line because it focuses on the profitable long-haul market. EADS's board expects to review plans for the plane later this month and might give a green light to the program. "I hope the decision will be positive," Mr. Gallois said in the radio interview.

While pledging to implement a "rigorous" turnaround plan and slash costs throughout Airbus, Mr. Gallois also stressed the need for "dialogue and equity" in implementing the plan.

The 62-year-old Frenchman, who previously ran the country's state railway and two state-owned aerospace companies, is respected for his diplomatic skills handling France's labor unions. At Airbus he faces the added dimension of international diplomacy, particularly between EADS's joint French and German control.

[Dinner]

Airbus will survive if for no other reason then it recieves massive amounts of direct cash from the EU. They can't lose. They can produce endless delays and floops, take what ever risks, and they'll still end up in fine shape. Boeing can't since they don't recieve subsidies which is why Boeing is more conservative with launching new aircraft.

[Spiffor]

Originally posted by Oerdin
Boeing can't since they don't recieve subsidies which is why Boeing is more conservative with launching new aircraft.

This statement (while partly wrong, since Boeing recieves a very large military demand) is favourable to public enterprise then. Thanks to the safety provided by it being subsidised, Airbus can go forward, and promote technological progress with more ease than the market

[VetLegion]

But subsidies don't come out of thin air. Competitive industries throughout EU are suffering as their profits are taken and shoveled at Airbus to keep it alive.

[Spiffor]

Originally posted by VetLegion
But subsidies don't come out of thin air. Competitive industries throughout EU are suffering as their profits are taken and shoveled at Airbus to keep it alive.

1. Airbus was heavily subsidised until a few years ago, because the EU wanted an aeronautics industry, that couldn't have occured with ordinary market conditions (because aeronautics require huge investments, have a big risk attached to them, and because the international market was already consolidated in the 1970's, unlike the beginning of the 20th century). This is par for the course of any industrial policy that aims at developing a specific sector.

2. Airbus became mature and competitive a few years ago. At that moment, the involved governments chose to privatize it. The new management wanted to flatter the shareholders, by having the profits soar. And soar they did, for some time.

3. In order to create these profits, Airbus did not re-invest much of its value-added. Also, the management hid problems for as long as possible, so that they could still paint Airbus with rose-cloured glasses. As a result, the technical problems (a delay that is counted in years is nothing new in aeronautics) are all revealed at once, at a time where the EADS management is also involved in a scandal.

4. The company would have remained healthy if the management hadn't been in such a haste to flatter the shareholders with short-term profits, and had the company's continued health in mind instead. But as usual, the transition from public to private company is bad, because they are two widely different cultures, and no manager is adapted to manage a transitional company.

5. Had the company remained healthy (read: had the management actually cared for the company instead of the shareholders), there would be no need for subsidies today.

[DanS]

Airbus has been heavily subsidized throughout. It hasn't ended in the last few years, contrary to what you are stating.

[Dinner]

Originally posted by Spiffor

This statement (while partly wrong, since Boeing recieves a very large military demand) is favourable to public enterprise then. Thanks to the safety provided by it being subsidised, Airbus can go forward, and promote technological progress with more ease than the market

Sorry but your basic premise, that military contracts are some how a subsidy, is flat wrong. Anyone can compete for those contracts just like a civilian contract. There is no subsidy.

[DanS]

With regard to the thought that Airbus can't lose, we very well may test that hypothesis. If the A380 comes in overweight (f.e., by moving to copper wire instead of aluminum wire), then Airbus could be compensating its customers for years to come because the aircraft's performance isn't to spec.