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Sun, May 06, 2007

EADS Boards Face Angry Shareholders

Airbus Employees, Small Shareholders Angered Over Shareholder Pay Out

It was an annual general meeting that could have been made for television... if it weren't so real to the 10,000 Airbus employees losing their jobs in a major restructuring program over delays of its A380 superjumbo airliner, as ANN has been reporting.

The Power8 program, which led to the layoffs, has instigated numerous protests and strikes, two of which were going on even as Friday's annual meeting took place. The layoffs have also become an issue in the French presidential elections, scheduled for Sunday.

French strategic shareholder Arnaud Lagardere opened the politically-charged annual meeting by reporting to shareholders that outside lawyers had found nothing wrong with European Aeronautic Defence & Space Co.'s (EADS) response to production flaws, thereby clearing top officials of personal liability for delays to the A380 that have led to massive job cuts, reported Reuters.

Lagardere was interrupted by a shouting shareholder before he had concluded his opening remarks.

After a delay in the launch of Airbus's A380 superjumbo airplane had stretched into two years, EADS posted a loss of 768 million euros ($1.01 billion) in October-December, according to the Associated Press.

Airbus still delivered more planes than major rival Boeing in 2006, but is expected to fall behind in 2008, given current order backlogs and its late-to-market midsize A350 jet.

"If you want to reduce your work force, you should start with yourself," declared Errol Keyner, representing the Dutch shareholders' organization VEB. "One CEO, one chairman, that's how you lead by example."

EADS' dual board system wasn't to blame for the company's troubles, said Lagardere, but "I'm not saying that the group structure will stay the way it is for the next century."

Outsourcing more work to suppliers, like Boeing does, said French co-Chief Executive Louis Gallois, would help the company share risks and lower costs.

Gallois added that due to the weaker dollar, EADS' sales would likely fall in 2007, and it would have a negative cash-flow of around 1 billion euros ($1.4 billion) due to more losses at Airbus. He predicted a profit in 2008, however.

In response to a German shareholder, Gallois said that high-profile cancellations of the A380 by Federal Express and UPS were "disappointing" but the situation was "not that bad."

"We have kept (most of) our customers and we are beginning again the campaign to sell the airplane, but to sell it we have to show that we can deliver," he said.

Gallois confirmed that the number of A380s the company will need to sell to break even on the project has risen due to the delays, but declined to give specifics.

Last year the company said it needed to sell around 420 of the planes to break even; current orders are at 156.

Gallois said the market for mid-sized aircraft was large, and Airbus would "take our share."

In a patent effort to pacify worker anger, Airbus France said separately Friday it had proposed a 2.5 percent salary increase and a 500 euros ($680) bonus for all employees after a meeting with labor leaders.

Although Airbus employs 22,000 people in France, 4,300 of those jobs are scheduled to be cut, reported ANN.

In the end, shareholders approved a 0.12 euros ($0.16) dividend at the meeting, down from 0.65 euros ($0.88) last year, as well as a motion allowing the company to issue new shares.

The vote was approved, with 52.05 percent in favor, 47.95 percent against.

Said Lagardere in regard to issuing new shares, "We feel a capital increase is not necessary at this time. We feel it's (issuing new shares) the worst way" to raise money.

The vote by the minority shareholders became more important because of the deadlock within the board of directors between French and German shareholders.

The French government and Lagardere were against payment of a dividend on the basis of EADS' recent financial performance, while DaimlerChrysler AG was in favor of a dividend payment.

Even former chief Noel Forgeard, who was fired last July over a two-year delay in A380 deliveries, was on the agenda Friday for those who felt his 8.5 million euro pay-off ($11,526,845 US) was not appropriate for the circumstances in which he was sacked, a story covered by ANN.

France's two presidential candidates both agree Forgeard should return the money and that the firm should refrain from paying a dividend this year.

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

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