Airbus Delays Overhaul
February 19, 2007
Airbus and its parent company EADS said that directors had ended a meeting on the planned "Power 8" restructuring plan on Sunday without agreement, meaning the plan would not be unveiled on Tuesday as previously expected.
Airbus chief executive Louis Gallois said that there was "the need to very quickly find a solution that vercomes national issues", referring to the sharing of work on Airbus's new mid-sized long-haul jet, the A350XWB.
The crisis was sparked by a string of problems and two-year delays to the huge programme to build the A380 superjumbo airliner.
The European group announced the broad outlines of Power 8 at the beginning of October, indicating that it planned to make job cuts, re-organise the distribution of work between its factories, use more sub-contracters and save on supply costs.
But the radical cutbacks and reorganisation ran into immediate strains between the governments, trades unions and shareholders in France and Germany.
Tuesday was to be the day when the runway was cleared for a new takeoff for the group, but the announcement means that the plan is again grounded.
Airbus has factories in Britain, France, Germany and Spain, but the main strains have arisen over the distribution of job cuts between French and German factories.
"The atmosphere is becoming more and more tense," a union source said Friday as the release of the plan approached.
EADS, which owns Airbus, is 58-percent controlled by French, German and Spanish interests which are either state-owned companies or companies with close political ties. The remaining 42 percent is publicly held.
Workers unnerved by possible cuts
The CGT union at Airbus parent company EADS had called for workers to mobilize on Tuesday to denounce what it called a "gigantic transnational reorganization" that has unnerved workers in both France and Germany, which hold major stakes in EADS.
Airbus, employing about 56,000 people, has said the restructuring will entail job losses, carried out according to age considerations as well as through a reduction in part-time and short-term employment.
The manufacturer hopes to save 30 percent in operating costs. It is expected to tighten the management structure of subsidiaries in France, Germany, Spain and Britain and to streamline certain administrative functions.
A greater reliance is also foreseen on sub-contractors for activities that are not part of the core Airbus operation. Sources have said the plan would reduce internal production from 65 percent to 50 percent.
Jobs at risk
In addition, some of the 16 European sites could be closed or sold under changes in the distribution of production tasks in Europe.
The French business newspaper Les Echos reported on Monday that Airbus could cut up to 12,000 jobs, with 3,000-4,000 in both France and Germany.
La Tribune daily said the plan could affect up to 10,000 jobs and that three factories would close: Meaulte in France and Varel and Nordenham in Germany.
Job losses are a particularly sensitive issue in France in the run up to presidential elections in April and May this year.
The French CGT union at Airbus parent company EADS had called for workers to mobilize on Tuesday to denounce what it called a "gigantic transnational reorganization".
German workers, who fear they will bear the brunt of the reorganization, are especially anxious about the fate of a plant in Hamburg, which has been held partially responsible for production problems with the A380.
Unconfirmed reports have said some of the work done on the A380 could be transferred to Airbus plants in Toulouse, southern France, which would also be responsible for assembling the new A350 long-haul carrier.
In exchange the Hamburg factory would take on assembling the single-aisle A320.
Politicians applying pressure
In December, Airbus chief Gallois said when launching the 10-billion-euro A350XWB project that it depended on application of Power 8.
Airbus is counting on cost savings to help finance the development and manufacturing costs of the aircraft, which is destined to compete with the successful Boeing 787 Dreamliner.
The plan is fraught with delicate political considerations, with German and French national interests bound up in its implementation.
German Economy Minister Michael Glos has vowed to do everything possible to protect the future of German production sites and has hinted that Germany might consider withdrawing some of its defense contracts with EADS, the Airbus parent.
In a veiled threat illustrating the political pressure placed on EADS and Airbus, German Economy Minister Michael Glos warned at the beginning of the month that the country would "review" its contracts with EADS if job cuts hit German workers more workers in other
countries.
Gallois has meanwhile had to defend the project in meetings with French Prime Minister Dominique de Villepin and German Chancellor Angela Merkel, who have demanded balanced treatment for all parties.