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Airbus may move production to US as euro soars
Plane maker says it will have to cut more jobs
The Guardian (UK) 12/04/2007
Author: David Gow
Copyright (C) 2007 The Guardian; Source: World Reporter (TM)


Airbus, the European plane maker, is considering plans to relocate production to a new plant in Alabama and other parts in the dollar zone because of the effects of the soaring euro, it emerged yesterday.

Issuing a "wake-up call" to Europe, Louis Gallois, chief executive of EADS, Airbus's parent company, warned that the continent's "industrial substance" was leaving. "A part of the European aeronautical and space industry is threatened by the evolution of the dollar and I think this is a problem with a political dimension."

As the euro rose marginally against the dollar to $1.46 - three cents off its all-time peak - Gallois called for a new G7 meeting devoted to the euro-dollar exchange rate because "there is a deep crisis in a number of industries solely due to the fact that the Americans are carrying out a policy that translates as the endless fall of the dollar."

His comments, on French radio, echoed those of Tom Enders, Airbus chief executive, last month that the dollar's weakness was "life-threatening" for the plane maker. EADS says that each 10 cent rise in the value of the dollar costs the group €1bn (£712m) in earnings.

Gallois's remarks came a day after Charles Edelstenne, head of the French plane maker Dassault, said he would relocate production overseas. They are among the starkest warnings from European industrialists about the impact of the weak dollar on manufacturing output. He also confirmed that Airbus would have to take out more costs, including jobs, on top of the €2bn savings and 10,000 job cuts because its Power8 restructuring plan is based on a $1.35 exchange rate.

He said Airbus would be forced to build aircraft components - doors, parts of the fuselage, wing elements - outside Europe over the coming decade. It is already building a plant in China that will produce the best-selling A320 single-aisle jet for the booming Asian market.

EADS sources confirmed that Airbus could set up a new plant in low-cost Mobile, Alabama, in the southern US for the final assembly of civil aircraft - alongside the A330-based air-to-air refuelling plane for the US air force. "But a precondition would be that we win the tanker contract," they said.

The Pentagon is expected to decide early in the new year on whether to award the multibillion contract to Airbus or Boeing, with analysts saying the race is 50-50 open. Airbus has teamed up with the US contractor Northrop Grumman to improve its chances.

EU finance chiefs, meanwhile, confirmed that the bloc faced economic slowdown because of financial turmoil caused by the US sub-prime crisis.

Joaquín Almunia, EU economic and monetary affairs commissioner, told a Eurofi thinktank conference.: "Tighter credit conditions imply fewer borrowing opportunities. This in turn has raised the prospect of slower economic growth in the coming years."

Jean-Claude Trichet, president of the European Central Bank, told the conference that current cross-border cooperation among supervisory authorities was not yet sufficient. Jean-Pierre Jouyet, the French minister for Europe, said France would propose greater integration of supervisory standards during its EU presidency in the second half of 2008 as the crisis had exposed Europe's vulnerability to events elsewhere.

How's your French these days?

UPDATE: French Union Calls On Airbus To Suspend Power8
Dow Jones 12/10/2007
Author: David Pearson

PARIS (Dow Jones)--A French labor union Monday called on Airbus to suspend the implementation of its Power8 cost-cutting and industrial reorganization program, saying that the company and its parent, European Aeronautic Defence & Space Co. NV (5730.FR) shouldn't be using the weakness of the dollar as a pretext to push through reforms.

The statement by the Democratic Federation of French Workers coincided with a meeting of labor representatives from Airbus's European plants at the company's headquarters in Toulouse, France.

One of the agenda items at Monday's meeting was an update by management on plans to spin off up to seven of Airbus's plants in a program that is hotly contested by the unions.

Airbus Chief Executive Thomas Enders told the meeting that the company doesn't expect to announce the sale of plants before Christmas, according to one union official.

Enders was confirming remarks made in a radio interview Sunday by Arnaud Lagardere, chairman of media company Lagardere SCA (13021.FR) and a major EADS shareholder. Lagardere said that the sale of the plants is unlikely before the end of the year.

The union statement said that the commercial aircraft company and industry representatives are trying to use the weak dollar to justify shifting some of design and production activities outside the euro zone.

EADS Chief Executive Louis Gallois said last week that the decision on the plant sale is unlikely by year-end. "There is no deadline," he told journalists, adding that the negotiations on the sales of the facilities in France, Germany and the U.K. has been complicated by the fall of the dollar that has shifted their break-even points.

Gallois said Airbus needs to shift parts of the company's production to countries outside the euro zone in the future in order to increase costs in dollars if it is to remain competitive. He said Airbus, whose revenue is in dollars while its costs are largely in euros, needs to make parts outside the euro zone and increase purchasing from dollar-based companies, but stressed that this will be a gradual process.

EADS has said it loses EUR1 billion in operating profit every time the dollar retreats by 10 cents against the euro.

Lagardere said on Sunday that there's no going back on the plant sale, saying it is "a firm decision," made necessary by the dollar's weakness, which he described as "a lethal danger."

The union acknowledged in its statement that the weak dollar is a competitive handicap for selling airplanes, but said the company is hiding behind this to put more pressure on employees and using it as a smokescreen to mask the problems of "unrealistic organization and management."

Labor unions hostile to the idea of shifting operations abroad received some unexpected backing Monday from French Prime Minister Francois Fillon, who said in an interview published in French financial daily Les Echos that the government will do everything it can to keep EADS from relocating its production to dollar-based areas.

He said Airbus cannot overcome the currency difficulty by relocating. Instead, he said, the government is urging expanded efforts to improve productivity and to better assist contractors.

The labor union said Airbus is faced with "gigantic" difficulties, notably making up delays in the industrial ramp-up of the A380, increasing the production rate of the A320 family of single-aisle jets, ensuring the A350 XWB wide-bodied jet program gets off the ground, getting control of the A400M military airlifter program and preparing for a new generation of single-aisle jets.