France, Germany agree to restructure Airbus' parent group

France, Germany agree to restructure Airbus' parent group
16-July-2007

TOULOUSE, France (AFP) - France and Germany agreed on Monday to scrap a cumbersome dual management structure at European aerospace group EADS in a shakeup aimed at pulling the aviation giant out of crisis.

President Nicolas Sarkozy and German Chancellor Angela Merkel presented the new leadership structure that gives France the top executive job at EADS but puts Germany in charge of troubled plane-making subsidiary Airbus.

The European Aeronautic Defence and Space Company had been headed by two co-chairmen and two co-chief executives from France and Germany in an arrangement that has been blamed for slow decision-making and ineffective management.

"I am convinced that we have come up with a good solution for the future of EADS and of Airbus," said Merkel after joining Sarkozy in touring an Airbus factory in the southwest city of Toulouse.

Sarkozy added: "EADS, Airbus, these are companies that have to be managed like companies and not like international organisations."

The new management structure will see current French co-chief executive Louis Gallois become the sole CEO of EADS while his German counterpart Thomas Enders becomes the chief executive at Airbus.

Enders will report to Gallois, who until now had also been serving as Airbus chief executive.

Germany's Ruediger Grube becomes the sole chairman of the board of directors while his French co-chairman, Arnaud Lagardere, steps down while remaining a member of the board.

Lagardere could take over from Grube under a system of alternating chairmen every five years, said Sarkozy.

"This is an equitable solution," Enders told reporters. "There is no winner. The only winner is EADS."

"It is a good day for EADS," Gallois told AFP. "The Franco-German balance has been preserved."

EADS is controlled by a group of French and German shareholders which are either public or politically-linked private investors.


Thomas Enders (L) and Louis Gallois (C) greet Nicolas Sarkozy at Toulouse-Blagnac airport
©AFP - Lionel Bonaventure
Squabbles over control and influence in the company have marked its seven-year history and analysts said maintaining the internal Franco-German balance would remain an issue.

"It is a very good step in the right direction," Zafar Khan, an analyst at Societe Generale told AFP.

"One thing that's a little bit negative is that there is still this French-German balance they are looking for -- but they needed to start somewhere."

The management changes come as Airbus is pushing through a sweeping restructuring plan to correct problems that saddled it with an operating loss last year despite its delivery of a record number of planes.

The spectacular fall into the red was caused mainly by delays and production problems with the Airbus A380 superjumbo jet, which is set to enter service later this year.


French President Nicolas Sarkozy chats with German Chancellor Angela Merkel
©AFP - Lionel Bonaventure
The Paris stock market reacted positively to the changes, with EADS stock gaining 0.75 percent in early afternoon trading at 24.16 euros.

While Sarkozy and Merkel had agreed on streamlining the management structure, maintaining the Franco-German balance had turned out to be a major bone of contention that threatened to sour relations.

But the two leaders appeared to revel in the breakthrough, enjoying lunch at a cafeteria in an Airbus factory where they smiled and shook hands with German and French workers.

Sarkozy said his proposal for opening up the controlling EADS shareholder pact to new investors would be discussed again in two or three months but he ruled out a capital increase in the short-term.

"Raising EADS capital is not an issue for the coming months, even for the coming years," he said.

On the thorny issue of the strength of the euro, Merkel said that France and Germany saw eye-to-eye on the need to keep the European Central Bank free of political meddling.


An Airbus plane under construction in Finkenwerder, northern Germany
©AFP/DDP/File - David Hecker
"We are both in agreement on the fact that the European Central Bank is independent. It is very important," Merkel said.

Sarkozy, who has called for more political oversight of the euro, endorsed Merkel's statement, saying "France supports the independence of the ECB."

EADS generated revenues of 39.4 billion euros (54.3 billion dollars) in 2006 and employs 116,000 people.

The principal shareholders are the French state, with 15 percent, and the French media and defence group Lagardere, which owns an equivalent stake that it is reducing to 7.5 percent.

On the German side, automaker DaimlerChrysler has 15 percent and 7.5 percent is held by a consortium of investors, including regional governments.