Insider Trading?

On Wednesday, Noel Forgeard said he had not been informed of the extent of production problems and their potential financial impact on the EADS-Airbus group when he exercised stock options worth 2.5 million euros ($3.4 million) on March 7, 2006.

Forgeard, former joint chief executive at EADS which owns Airbus, told the magazine Le Point: "Airbus did not report any unrecoverable delay before the middle of April 2006, and at that time the financial consequences were very limited."

He repeated that he had "respected all of the rules (at EADS) which are among the most restrictive among companies quoted on the CAC 40 index."

The controversy and criticism of a big severance payment to Forgeard are hot issues in France particularly, where the new government under President Nicolas Sarkozy has signaled it will act to curb so-called "golden handshakes."

Insider trading?

Forgeard and many other senior managers sold stock options in March last year, three months before the European Aeronautics Defence and Space Company and Airbus announced serious delays in production of the A380 superjumbo airliner.

Two big shareholders in EADS, DaimlerChrysler in Germany and Lagardere group in France each decided on March 20 to sell stakes of 7.5 percent.

The group had said in 2005 that there were some problems with production and that it was investigating the extent of these. But the announcement in June 2006 of deep problems came as a shock to the stock market and the price of shares in EADS fell heavily.

The problems rapidly developed into a long crisis with changes in top management and a rescue plan involving the loss of 10,000 jobs, although this remains clouded in some uncertainty. There is also a prospect that EADS will have to raise new capital.

Forgeard is the target of suspicions, renewed in allegations in a press report on Tuesday, that he was aware of the impact of production problems on the group when he decided to exercise stock options.

Blames German managers

The use of such privileged information, which has not been communicated publicly to market authorities, is known as insider trading and is illegal because it privileges one investor over another, distorts the equitable availability of information and therefore undermines confidence in a stock market.

Stock market rules require managers to inform the market quickly if they become aware of a sudden and significant change in their company's prospects.

Forgeard also argued that during his period in various top positions at Airbus, the company had become "a world leader," and that despite the planned loss of 10,000 jobs, "the balance over eight years is positive to the extent of tens of thousands of jobs."

He also blamed a large part of the production problems on the attitude of top managers in Germany where much of the work on Airbus airliners is carried out, saying they wanted to continue doing things their way while he wanted to a single, overall method of working.

This was a reference to revelations that software used for installing cabling systems in Hamburg, Germany, was not compatible with design software at Airbus headquarters in Toulouse, France.

Problems in adapting complex cabling to the requirements of individual airlines were at the center of the delays to production.

Forgeard also launched a personal attack on his co-chair at the time, Germany's Thomas Enders.

"I ask myself whether he hadn't been commissioned by Daimler boss Jürgen Schrempp to neutralize or even get rid of me," the former manager said.

Qatar stays loyal

The head of Lagardere group, and joint co-chairman of EADS, Arnaud Lagardere was questioned at length on Tuesday by stock market regulators probing suspicions that there had been insider trading in EADS stock.

Both Forgeard and Lagardere have insisted that they did nothing wrong.

On Wednesday, the Persian Gulf state of Qatar signed an order for 80 Airbus A350 aircraft worth $16 billion, the largest contract to date for the model. Since it was founded in 1994, Qatar Airways has only bought Airbus planes, including the delay-plagued A380.