Leadership Row Leaves EADS Grounded
June 14, 2005
Airbus' new super-jumbo A380, the world's largest airliner, was the undisputed star of the glitzy inauguration of the weeklong aviation show at Le Bourget airport, north of Paris, on Monday.
But, the festive mood didn't seem to lift the flagging spirits of Airbus employees. The fulsome praise -- "a European success" -- showered by French President Chirac after a visit aboard the A380 seemed strangely out of place in face of a persisting and damaging battle for the reins of the European Aeronautic Defense and Space Company (EADS) and its subsidiary, Airbus.
The embattled EADS company even canceled a news conference scheduled Tuesday at the air show. The move amounts to an embarrassing admittance of a strategic deadlock at the company, considered a showpiece for the European aviation industry.
EADS in disarray
EADS has been in disarray after failing to install its two new chief executives, Frenchman Noel Forgeard and German Thoman Enders, due to internal strife. The conflict first broke when Airbus chief Forgeard tried to end the dual leadership of the French-German EADS last year and take over the reins alone.
Forgeard initially was supported by French President Chirac but German-US carmaker DaimlerChrysler, the main German shareholder who has a 30-percent stake in EADS and thus the same as the French Lagardere Group and the French government, blocked the move.
Establishing two co-leaders was intended to end the crisis. But, Forgeard and Enders have been waiting weeks for their confirmation as co-bosses while EADS in the meantime is led temporarily by members of its supervisory board. The main shareholders are unable to decide on the question of succession.
The conflict has also blocked the nomination of a successor to Forgeard as CEO at EADS subsidiary Airbus. "No decision would happen during the show," an informed source told AFP.
Wrangling over business deals
Meanwhile, criticism of Noel Forgeard is growing louder for providing the trigger for the current crisis, with his move to take over the EADS helm at the end of last year. Even President Chirac, who has backed Forgeard so far, is apparently distancing himself from his former consultant in the face of the political fallout.
According to aviation industry experts, rumors in Paris suggest that Forgeard may retain his position as Airbus head while another French national would be nominated to the EADS co-leadership instead.
But, the crisis in EADS isn't confined to a struggle for the top spot. Shareholders are also wrangling over whether EADS should take over important suppliers such as the electronics giant Thales. Forgeard and Chirac are said to be in favor while DaimlerChrysler has ruled out a complete fusion which would lead to the French acquiring a larger chunk of shares in EADS.
EADS entangled in subsides row with Boeing
What's clear however is that EADS cannot afford such a damaging power struggle in its ranks at a time when it is preoccupied with a subsidies dispute with archrival Boeing.
Washington has accused the EU of violating trade laws by subsidizing the Airbus project. The Europeans argue that the US government subsidizes Boeing through billion-strong arms contracts, among other things. Both the US and the EU have filed complaints with the World Trade Organization (WTO) and the trade body is to begin looking at them this week. EU Trade Commissioner Peter Mandelson is already expecting "the biggest, trickiest and most expensive legal dispute in the history of the WTO."
EADS might take some small comfort from the fact that Boeing doesn't exactly have a stable leadership at present itself. The US aviation giant has been looking for a successor to Harry Stonecipher, its CEO who was forced out for having had a "personal relationship" with a female executive in the company. But, as opposed to EADS, Boeing might solve its personnel problems more easily with successor Alan Mulally already getting ready for the job.
What is more worrying for EADS is that its US rival's order book is already fatter than that of Airbus, thanks to the 787, Boeing's first new model in 10 years, due to enter service in 2008. Last year Airbus outstripped Boeing orders 370 to 277.
The 787, with 250 seats, has already attracted 266 firm orders and options from carriers seduced by its fuel efficiency. Airbus plans to strike back with the A350, a technologically advanced version of the A330 due to enter service in 2010.
There was some light at the end of the tunnel for embattled EADS on the first day of the Paris air show however: Qatar Airways announced it planned to buy 60 models of the A350.