Airbus Crisis ‘Extremely Serious’: Gallois
PARIS ~ Airbus chief Louis Gallois hit back at unions fighting cutbacks, warning on Wednesday that the group had to slim down urgently because the star A380 superjumbo was guzzling cash.
The company was in deep trouble and 10,000 job cuts were “unavoidable,” vital and urgent, Gallois said in defiance of unions threatening a long fight after mass strikes and protest marches on Tuesday.
But he reassured investors that parent group EADS had enough cash for now and that “there is no urgency for a capital increase,” although eventually it would need new funds of “less than” 5 billion euros (US$6.6 billion).
Depressed shares in the European Aeronautic Defence and Space company (EADS) responded with a rally of 2.41 percent.
The situation was “extremely serious,” Gallois said in a radio interview, defying the protests at four factories in France and a march on Tuesday by an estimated 12,000-15,000 workers through Toulouse, France, where Airbus is based.
Revealing the full depths of the drama arising from delays in the A380 superjumbo program, he told the Le Monde newspaper: “The delays to the A380 are costing more than 5 billion euros from 2006 to 2010. This is what triggered Power8.”
Power8 is the name of the rescue measures to generate extra cash of 5 billion euros by 2010 and 2.1 billion euros per year thereafter.
But the main medium-term challenge for Airbus was to cope with the fall of the dollar and to be competitive if the euro rose to $1.35.
“This is a strict minimum,” he told Le Monde. “When the dollar falls 10 cents, it costs the company 1 billion euros.”
The dollar has fallen heavily in the last three years to about $1.32 to the euro, and some analysts say that US deficits could drive it lower.
“The targets in the plan are unavoidable,” Gallois said.
Asked if he could have delayed the announcement of the measures last week until after a French presidential election in April and May, he replied: “We can’t delay decisions.”
Gallois referred bluntly to strains between French and German interests, a factor in a five-month delay in presenting the cuts and widely seen as central to structural problems in the company.
He declared: “I hope that the national conflicts will not get worse, but the opposite. They are poison for Airbus.”
Trade unions have warned of a Europe-wide strike within the group on March 16, despite tension between labor groups in Germany and France about how cuts and new work are to be distributed between the countries.
In France on Tuesday, a leader of the main Force Ouvriere (Worker Strength) union at Airbus, Jean-Francois Knepper had warned: “If we aren’t heard today, we’ll have to strike harder. The fight is just beginning.”
Delays and uncertainty have cost Airbus some orders recently, analysts doubt that the rescue cuts can be carried through, and the price of shares in the parent group EADS slumped as controversy over the cuts grew, shedding about 11.5 percent at one point.
But they rallied slightly on Tuesday and rose by 2.41 percent to 23.76 euros on Wednesday after Gallois had reassured that the company did not need to increase capital urgently.
Gallois urged leading French politicians campaigning in the presidential election not to interfere in management.
“I would not want Airbus to become a hostage of the presidential campaign,” he said. “The situation is extremely serious. We have to make changes in the business. The administrative costs are far too high.”
The main shareholders in EADS are the French state and the French Lagardere group, each with 15 percent, although Lagardere holds all of these voting rights, and the German group DaimlerChrysler, also with 15 percent. A consortium of German interests has 7.5 percent.
Lagardere’s holding is to fall to 7.5 percent in July.Filed under: