PrintNovember 23, 2007
Airbus in 'life-threatening' situation?
Tom Enders, CEO of Airbus, has told German unions that the company is in a ‘life-threatening' situation thanks to the decline of the dollar against the euro. Forbes cites a report from Der Spiegel that Enders said, "We need to question our business model. It is no longer sustainable."
Enders says that the company is planning to make significant cuts in its R&D budget as a way of saving money. Given the fact that Airbus is developing the A350XWB jetliner to compete with the Boeing 787 (and has already booked hundreds of orders for the plane which will not fly for several more years), R&D cuts do not augur well for the company's ability to keep the development schedule on track.
Reuters reports that workers are suspicious the remarks are a ploy to strengthen the company's hand in cutting labor expense through layoffs and outsourcing, planned as part of the "Power 8" restructuring plan.
The workers' council at European aircraft manufacturer Airbus disputed remarks made by management on Thursday that the weak U.S. dollar threatened the company's survival, according to the Berliner Zeitung newspaper.
The strength of the euro creates a problem for the company but does not threaten the planemaker's existence, Ruediger Luetjen, chief of Airbus' workers' council said, according to Friday's editions of the newspaper.
Airbus must play both a political and a commercial strategy, since it has relied on government backing, and faces political obstacles to laying off workers. The company has enjoyed tremendous success in the marketplace recently, pricing its products in dollars. But making a profit on those sales could prove difficult or impossible if the euro continues to be so expensive in terms of dollars.
Should the company's survival come into question, I have little doubt that government funds will be made available. It is simply too big and too symbolically important for France and Germany to allow it to fail. Of course, outright subsidies wqould cause even more trade problems with the United States, which is already embroiled in a dispute over government financing of the company.
Hat tip: Henry Fellerman
