EADS faces Boeing decision and internal division

6th December 2004, Comments 0 comments

PARIS, Dec 5 (AFP) - The European Aeronautic Defence and Space Company faces a crucial week as it prepares to make a decision on the possible development of a new plane to challenge US rival Boeing and grapples with internal Franco-German friction.

PARIS, Dec 5 (AFP) - The European Aeronautic Defence and Space Company faces a crucial week as it prepares to make a decision on the possible development of a new plane to challenge US rival Boeing and grapples with internal Franco-German friction.

A US-European Union row over government assistance to both Boeing and EADS subsidiary Airbus also will get high-profile treatment here on Monday in the first meeting of newly named EU Trade Commissioner Peter Mandelson and US counterpart Robert Zoellick.

Then on Friday the EADS board of directors will convene for the second time in two weeks to decide on whether to go ahead with the A350, an aircraft that would compete head-on with Boeing's planned fuel-efficient 7E7.

Rainer Hertrich, co-chief executive of EADS, said earlier this week that he expected a positive decision on the A350 to emerge from Friday's meeting.

Airbus, of which EADS holds 80 percent and BAE Systems of Britain the rest, would invest EUR 4 billion (USD 5.3 billion) in launching the A350. It aims to sell 900 of the planes over the next 20 years, according to the newspaper Financial Times Deutschland.

Airbus chief executive Noel Forgeard has said he would seek reimbursable loans from the four Airbus partners - Britain, France, Germany and Spain - to finance a third of the development cost.

The German government, according to the Financial Times Deutschland, has allocated EUR 650 million in its 2005 budget to finance a 17-year credit for Airbus.

But the German initiative is likely to deepen the US-EU conflict on civil aviation subsidies, with each side insisting that the other's government assistance violates international trade rules.

Both parties in early October registered complaints at the World Trade Organisation on the subsidy question, with a 60-day period for consultations expiring Monday.

Ordinarily, failure to reach a settlement by consensus would prompt one or both of the parties to ask the WTO to put together a panel to settle the dispute.

But on Thursday a US official said Washington would delay a request for a WTO panel to hear its complaint.

The official, who asked not to be identified, said the delay was simply to allow Mandelson, the new EU trade tsar, time to review the matter.

"We will not be making a request to establish a WTO panel before the end of the year," he told AFP.

Mandelson said Friday through a spokeswoman that he wanted clarification of the US stance.

"Peter Mandelson is looking forward to (US Trade Representative Robert) Zoellick clarifying the US position," spokeswoman Claude Veron-Reville told reporters.

"If the United States is now pulling back from the WTO, Mr. Mandelson would be interested to hear this directly from the US trade representative, to hear what they intend to do next," she added.

The looming decision on the A350 and the US-EU subsidy spat comes as a power-sharing dispute within EADS has heated up. The mandate of the current board expires in July 2005.

The Financial Times reported Friday that the French state and the Largardere group, which together equally hold a 30.7 percent stake in EADS, have suggested the appointment of a German to head Airbus in exchange for the promotion of Forgeard, currently Airbus chief executive, to replace Camus as EADS co-chief executive.

But the German partners fear that a new German head of Airbus would come under pressure as he would have to report to Forgeard, the former French Airbus chief executive, according to the paper.

"He would be caught in a sandwich and it would make no sense even if it may make sense for the French," a source close to DaimlerChrysler, a 30 percent shareholder in EADS, told the Financial Times.

 

© AFP

Subject: French News

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