Airbus rescue delayed by cross-border tensions

20th February 2007, Comments 0 comments

PARIS, Feb 19, 2007 (AFP) - European aircraft manufacturer Airbus delayed unveiling its long-awaited rescue plan on Monday, pointing to renewed strains between Germany and France about about where cuts will fall.

PARIS, Feb 19, 2007 (AFP) - European aircraft manufacturer Airbus delayed unveiling its long-awaited rescue plan on Monday, pointing to renewed strains between Germany and France about about where cuts will fall.

The decision stemmed from a dispute about the sharing of work for Airbus's new mid-sized long-haul jet, the A350 XWB, highlighting nationalist tensions at the heart of the company and the impact of government pressure to save jobs.

Airbus chief executive Louis Gallois stressed that there was "the need to very quickly find a solution that overcomes national issues."

The European group announced the broad outlines of its "Power 8" restructuring plan in October, indicating it planned to make job cuts, re-organise work between its factories, use more sub-contracters and cut supply costs.

Airbus relies on factories in Britain, France, Germany and Spain, but the main tensions have arisen over the distribution of job cuts between French and German plants.

The group had planned to unveil details of its cost-cutting scheme to its 56,000-strong workforce on Tuesday, but the board of parent company EADS was unable to approve the package of measures at a meeting on Sunday, Airbus said.

Airbus said talks to find an agreement "will be resumed within the next few days."

French Finance Minister Thierry Breton called for calm after the latest delay to hit the company.

"I call everyone to reason on this affair," he told a television interviewer, saying it was Airbus itself that had to assume its responibilities and that "all excessive interference would be counterproductive."

Power 8 is intended to save the group 5.0 billion euros (6.6 billion dollars) by 2010 and 2.0 billion euros per year thereafter, but it is fiercely contested by trade unions in France and Germany.

Analysts said the restructuring plan was critical for the future of the A350 XWB, and one London-based expert suggested the delay might be because either the French or German governments had threatened to withdraw their backing for the plane.

Airbus has said it will seek government assistance to help finance the 10-billion-euro A350 XWB project.

Another analyst commented: "The A350 is problematic because they both want to have a production line, France and Germany, and Airbus actually wants to streamline it to one production line."

The finances of the Toulouse, France-based group have been severely strained by a string of production problems with its A380 superjumbo airliner which have led to two-year delays to deliveries.

EADS said in January that Airbus would report an operating loss for 2006 because of higher-than-expected costs related to the A380 programme.

As well as government help, Airbus is also counting on cost savings to help finance the development of the A350XWB project, which is seen as a vital response to the current popularity of Boeing planes.

German Economy Minister Michael Glos, speaking in Brussels on Monday, commented: "It's not a bad thing in my opinion that the announcement has been a bit delayed again."

In a veiled threat illustrating the political pressure placed on EADS and Airbus recently, Glos had warned at the beginning of the month that his country would "review" its contracts with EADS if job cuts hit German workers more than workers in other countries.

In October, French President Jacques Chirac had called for restructuring at Airbus to be "distributed harmoniously" between the main production sites at Hamburg in Germany and Toulouse in France.

EADS, which owns Airbus, is 58-percent controlled by French, German and Spanish interests which are either state-owned companies or companies with close ties to the state. The remaining 42 percent is publicly held.

Shares in EADS closed 2.87 percent higher at 25.84 euros on the Paris stock exchange, with the price boosted by rumours that Qatari investment fund QIA was set to buy a stake of up to 10 percent in EADS, analysts said.

The statement from Airbus and EADS said that the outstanding issue causing the delay to Power 8 was the "cross national sharing of the industrial workload related to the A350 XWB."

A source close to the company told AFP that one remaining problem was the location of manufacturing of panelling for the A350, which is made out of advanced composite materials.

Copuright AFP

SUbject: French news

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