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Mon, Jul 09, 2007

Report: EADS Looking Towards Streamlined Management Structure

Talk Of Replacing Dual Power-Sharing Arrangement With One CEO, One Chairman

A change may be in the offing for management at European Aeronautic Defense & Space Co... and some would say a change is long overdue.

The Wall Street Journal reports there is talk at EADS of removing the dual-chief-executive structure that has defined the aerospace consortium throughout its seven-year history. Critics say that power breakdown -- in which German and French executives share the CEO and Chairman titles, to represent shareholders in those countries -- has stifled efforts to restructure the company.

What remains unclear, however, is whether the plan -- which would retain Germany's Thomas Enders as the sole CEO -- would ease political and nationalist in-fighting between French and German shareholders, or make the situation even worse.

"It's not clear whether French and German shareholders understand what shifting to a lighter management structure, that of an ordinary corporation, means," said an unidentified person close to the talks. "No more direct phone calls to the executives."

Under the plan said to be in the works, EADS shareholders would name a Frenchman as sole chairman of the consortium, presumably current co-Chairman Arnard Lagardere, or former EADS co-CEO Phillipe Camus. The current German co-Chairman, Rudiger Grube, wouldn't remain in that position, according to the unnamed source.

Enders currently shares the CEO title at EADS with Louis Gallois, a Frenchman, who is also chief executive at Airbus. Gallois (below) would keep that role, but lose the co-CEO title at EADS, under the plan.

Ideally, the new management structure would be agreed upon before a planned July 16 meeting between new French president Nicolas Sarkozy, and German Chancellor Angela Merkel. 

Proponents of the one-CEO plan maintain the current management structure at EADS hindered its response to production problems with the Airbus A380, and has slowed the planemaker's ability to respond to the challenge posed by rival Boeing's 787 Dreamliner.
After going through one major redesign, Airbus' A350 XWB isn't due to fly until 2013 -- five years after the 787 is scheduled to enter service.

The hope is that a more streamlined management structure would impart a "buck stops here" mentality at EADs -- with executives better able to meet challenges, and less concerned with who To blame for them.

EADS was formed in 2000 following the merger of several private and state-owned aerospace companies in France and Germany. Shareholders in both countries own 50 percent of the company combined, with interests split down the middle at 22.5 percent apiece. The French government owns the majority of that country's stake, with the remaining 7.5 percent owned by media group Lagardere SCA.

German automaker DaimlerChrysler AG -- soon to be just Daimler -- owns that country's full share in EADS.

EADS reported a first-quarter net loss of $13.6 million this year, according to the WSJ, after posting a $709 million profit for the same period in 2006. Restructuring costs are to blame for the lopsided discrepancy.

FMI: www.eads.com

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