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Airbus postpones restructuring announcement

Airbus said Monday that its long-awaited restructuring plan, designed to make up for costly production setbacks, has itself been delayed.
/ Source: The Associated Press

Airbus said Monday that its long-awaited restructuring plan, designed to make up for costly production setbacks, has itself been delayed.

The European aircraft maker called off a works council meeting and news conference at which the "Power8" turnaround strategy was to have been unveiled Tuesday, after French and German shareholders of parent company EADS failed to agree on where to build the A350 XWB — a planned rival to Boeing Co.'s mid-sized 787.

A European Aeronautic Defence and Space Co. board meeting ended late Sunday without agreement on dividing the industrial workload for the A350 XWB, the Franco-German defense group said in statement.

In a sign of renewed tensions within EADS, French co-CEO Louis Gallois — who also heads Airbus — defended his restructuring plan in a separate statement issued by the Toulouse, France-based aircraft maker.

"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," Gallois said.

"Airbus cannot delay any longer implementing Power8," he said.

France's two main financial newspapers, Les Echos and La Tribune, reported Monday that Gallois is seeking to cut close to 10,000 of the company's 55,000 jobs, sell off some production units and centralize assembly of the A350 in France, in exchange for agreeing to build a revamped model of the single-aisle A320 airliner in Germany.

Under the plan, France and Germany would each contribute between 3,000 and 4,000 of the job cuts, Les Echos said. Neither paper named sources. Airbus and EADS both declined to comment on the restructuring proposals or the discussions.

Shares of European Aeronautic Defence and Space Co. rose 2.9 percent in Paris, as the delay was overshadowed by media reports that Qatar is mulling the purchase of a 10 percent stake in the company.

"It's difficult to interpret the delay as a good or bad sign," said Jean-Michel Salvador, an analyst with Paris brokerage Fideuram Wargny.

Airbus is struggling to recover from a costly two-year delay to its double-decker A380 superjumbo program while funding development of the A350, a belated rival to Boeing Co.'s 787 — which has steadily won business from Airbus in the lucrative market for long-range, mid-size planes.

The A380 delays wiped about 5 billion euros ($6.5 billion) off profit forecasts for 2006-2010, and the Power8 plan seeks to claw back the same figure in savings over that period.

Besides the production crisis, Airbus has been badly hit by the weakness of the U.S. dollar — the currency in which its planes are priced — and is expected to shift more of its supplier costs and contract work to dollar-linked economies, as part of the restructuring effort.

The impending shake-up is being closely watched by the French government — which owns 15 percent of EADS — and by Germany. Berlin recently oversaw a deal in which DaimlerChrysler AG sold a 7.5 percent stake to a group of 15 banks, including eight public-sector institutions. The German carmaker retains a 15 percent holding, and Paris-based Lagardere SCA owns 7.5 percent.

German Economics Minister Michael Glos, who recently suggested that EADS could lose defense contracts if it cut too many jobs in the country, reiterated Monday that the restructuring plan should be "balanced" between the two countries and take account of the views of local and regional politicians.

Christian Wulff, the governor of Lower Saxony — where Airbus has facilities — said the reform should "secure Germany as an aviation location in the long term."

Underlining the political sensitivity of the Airbus plan, President Jacques Chirac's office confirmed that the French head of state was likely to discuss the subject with German Chancellor Angela Merkel when the two meet in Germany on Friday.

"One can only assume that somebody has put their oar in at the last moment and caused something of a rethink," ABN AMRO analyst Sandy Morris said.

Morris believes the high proportion of composite materials in the A350 design could work against Airbus sites in Germany — where the metal fuselages are currently produced — and in favor of Spain, which has superior composites expertise.

"Germany's role in the aircraft could be quite small" if Airbus took the most rational approach to building the plane, he said. "But if the governments make it worth your while then nothing can be ruled out."

No new date has been set for the restructuring plan to be presented to staff representatives, an Airbus spokeswoman said late Monday.