EADS Says Change Must Start From Top

Newly appointed Airbus CEO Louis Gallois, also EADS co-CEO, is set to restructure the planemaker -- its management that is.

Gallois took the reins from recently resigned Christian Streiff, who stepped down amid squabbling over management decisions.

As ANN reported, Streiff wanted to restructure embattled Airbus following a third delay announcement with the A380 program. Some analysts calculate the cost of those delays to the company at over $6 billion -- not including compensation to be paid to customers waiting for their superjumbos.

Philip Lawrence, director of the Aerospace Research Center at the University of the West of England in Bristol says with all the financial hemorrhaging, Airbus must now sell at least 350 A380s just to break even on the program. So far, it holds 159 orders with no new takers in over a year.

Airbus announced the last A380 delay a week before Streiff presented EADS his non-negotiable restructuring plan. When EADS said no, Streiff said goodbye.

Political pressure seems to be the biggest challenge for Gallois. Countries set to lose jobs as Airbus slims down are pressuring the manufacturer from all sides. The biggest rift is, of course, between France and Germany -- who also remain the biggest shareholders in EADS, Airbus' parent company.

Aerospace analyst Richard Aboulafia at the Fairfax, VA Teal Group told the New York Times, "The political balancing act has hampered the company’s efficiency. There are a lot of needless inefficiencies built into the management structure and the production processes that are there to satisfy political goals."

It's those managerial inefficiencies that Gallois is set to go after first. And Gallois, former head of the French national railroad, and no stranger to political maneuvering, seems just the man to make it happen.

But even Gallois warns of eventual "painful" job cuts. European aerospace analysts estimate the company may have to sell up to seven of its sixteen assembly plants.

During a visit to a Hamburg Airbus plant last week, Gallois reassured German workers they would not suffer alone saying, "We have to ask for balanced efforts from both [Germany and France]."

Rumors from all over Europe indicate national and even local governments are poised to purchase shares in EADS in an effort to protect jobs.

With politicians from France, Germany, Spain and now even Russia involved, Mr. Gallois certainly has his job cut out for him.

Experts on both sides of the pond agree though, that eventually Airbus must decide if it exists to make money for its shareholders, or as a jobs program for the continent.

FMI: www.eads.com, www.airbus.com