Germany Wants More Widebody Work

A controversial plan to reorganize troubled planemaker Airbus is on hold, after French and German boardmembers at parent company EADS couldn't reach a decision Monday on how work on the upcoming A350XWB will be distributed between the two countries.

Airbus was scheduled to make an announcement Tuesday on its Power8 reorganization plan, which many expect will aim to cut $2.8 billion in annual expenses through job cuts and plant closings. The cuts are necessary to recoup $6.3 billion in losses in the oft-delayed A380 program -- and give the planemaker money to develop a worthy competitor to Boeing's upcoming 787 Dreamliner.

Bloomberg reports board members at Airbus parent company EADS balked at a proposal to realign Airbus operations, which would focus production of narrowbody aircraft such as the planemaker's popular A320 family in Germany, with all widebody production done in France. Currently, Airbus constructs all widebody planes -- such as its A330, A340 and the A380 -- in Toulouse, with production of smaller aircraft split between plants in the two countries. German plants also produce fuselage shells for the larger planes.

The plan to focus all widebody construction in Germany has drawn the ire of workers. While Airbus produces significantly more smaller planes than it does large ones... German workers were hoping to get a slice of the A350 pie, too.

In particular, Germany hopes to benefit its aerospace industry with the advanced composite technologies needed for that program. German officials have threatened to "review" their existing military orders from EADS if that country doesn't get the work.

"Apparently the Germans want more work on the A350," said Exane BNP Paribas analyst Olivier Esnou, "but this flies in the face of everything Airbus wants to do in rationalizing production. It's just not coherent."

Airbus' parent EADS is a pan-European company with ties to governments in several countries. Its corporate structure is designed to prevent any one country from having too much control.

"I made proposals which I deem balanced, both from an industrial and a technological point of view, and which serve our objective of economic competitiveness," said Louis Gallois, Airbus CEO and the French Co-CEO of EADS. "I wish that they can lead to the consensus we urgently need."

German CEO Tom Enders replied the company will "take the time necessary to get the best solution for our shareholders and our employees."

Until issues with who-does-what on the A350 are sorted out, Airbus will hang in the balance.

"All parties involved need to realize the huge risk here," said Teal group analyst Richard Aboulafia. "Failure is in fact an option."

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