Posted on 11/18/2006 9:20:18 PM PST by Paleo Conservative
French economic growth is slumping and the problems at Airbus are getting blamed for it. The two year delay in delivery of the A380 super jumbo is reverberating throughout the French and EU economies. Politics, always a factor at the mammoth "social enterprise," continues to intrude, as fear of unemployment and fear of failure motivate politicians to take measures dumping yet more tax money into Airbus.
The aerospace business, at the level occupied by Airbus and Boeing, is mind-bogglingly complex, technologically sophisticated, and extremely large in scale. Inevitably, the national interests of great nations are at stake in the fate of companies and even products. The business generates and perfects new technology consistently, literally living on the leading edge of innovation. Its products are a key part of the driving force of globalization.
This business really matters in terms of its leverage on the way the world grows and changes. That is why I have devoted an extraordinary amount of time and space to coverage of Airbus since the A380 began having its public troubles.
The two year delivery delay (announced in steps) is having consequences for many other companies with their own employees, cash flow worries, and futures to navigate. They, too, have suppliers, employees, and communities. The food chain is very large and long.
The scale is so great that it is starting to affect France and the EU. The full effect will be felt some time in the future.
Ambrose Evans-Pritchard of the UK Telegraph writes,
The French economy slumped in the third quarter as the Airbus crisis began to exact its toll, dousing hopes that Europe would take over as world's growth engine as America slows. [....]Jean Michel-Six, an economist of Standard & Poor's, said French exports were suffering a loss of global market share due to high labour costs and the strong euro. "I am afraid that loss of exports is the major factor behind this bad surprise, and Airbus may be starting to play a role. Airbus deliveries generate $1.5bn (£1.01bn) a month for French exports and this is now in question. There had originally been plans to deliver 25 of the A380 jumbos in 2007 and instead there will be just one."
Prime minister Dominique de Villepin was caught flat-footed by the data after playing up the French recovery "miracle" earlier this year. "Sadly we're seeing a pause in growth but this should inspire us to yet more grit and determination," he said yesterday.
There is almost no chance of France meeting the growth rate of 2.5pc predicted by the European Commission for 2007. The European Central Bank is expected to press ahead next month with a quarter point rise in interest rates to 3.5pc, arguing excess credit has swamped the system with excess liquidity.
Companies are unable to deliver and get paid for components and systems meant for the A380s that were to be delivered starting late this year. They have a hole in their cash flow. Some could perish in bankruptcy, unable to pay their own bills and liquidated, subtracted from the French and European aerospace production complex. The French understand intuitively that dependence on outsiders for key production inputs must be avoided. It compromises the strategic independence they prize.
French prime minister Dominique de Villepin has rushed to the rescue with a 145 million euro ($186 million) package of loans, according to AP:
Villepin promised $103 million in government loans and guarantees for Airbus suppliers from 2007-2008, and a further $83 million in funding and tax breaks for aerospace and related industries--some of which would be earmarked for research facilities in Toulouse."We are standing by Airbus and all of its subcontractors," Villepin said during a visit to Toulouse, southwestern France, where the European jetmaker is based. Villepin was visiting one of Airbus's subcontractors.
This state aid, even if the loans are not officially called "forgivable" will only aggravate the World Trade Organization complaint the US filed today against Airbus for subsidies. (For its part, Airbus has a counter-complaint against subsidies enjoyed by Boeing). The French state is unlikely to foreclose and destroy jobs, no matter what the official terms. As for the ultimate terms of any rescue, no doubt they will be quite negotiable, depending in no small measure on the personal political connections of the patron.
The extreme coziness of the French state with key interests involved in Airbus is well-revealed in a remarkable investigatory report published this week in The Economist. Reviewing the very complex history by which the French conglomerate Lagardere came to hold a major share of stock in the parent of Airbus, the magazine discovers some very peculiar odors.
The tale is a sorry one: of a Socialist government selling off a state company--Aérospatiale (a leading partner in Airbus)--at a bargain-basement price to a firm belonging to an influential entrepreneur; of his protégés spending more time fighting each other than attacking Airbus's rival, Boeing; and of the new owner baling out at a vast profit, in part by selling shares back to the government, just before the scale of the mismanagement was made public.The large, powerful, and well-connected interests usually make out fine in most countries, of course. But the degree of French state penetration of the economy and its willingness to intervene financially and strategically make this tendency even more dangerous there than in many other countries.
The biggest current question mark hanging over Airbus is whether or not EADS, the parent of Airbus, will approve a plan to develop and produce the A350XWB high tech fuel efficient medium-size intercontinental airliner to compete with the hot-selling Boeing 787 Dreamliner. The head of EADS, Louis Gallois, says that a decision will come by the end of the month.
If the decision is yes, then EADS and Airbus must somehow come up with about 10 billion euros to fund its development costs. But access to cash is only part of the problem for development of the A350XWB. Airbus, which manufactures in the euro zone, has costs which are simply too high to compete with Boeing, anchored in the dollar zone. As a result, Gallois is warning current Airbus suppliers,
'We cannot launch a programme if we are not certain of being competitive,'By this he means not only should suppliers prepare to cut their own costs, they should prepare to see work given to competitors located in cheaper wage and currency countries, like Russia and China, both of which are building ties of influence within Airbus. Unless Airbus can reduce its costs, it will not earn cash that should fund future products.Like the French Revolution devouring its young, Airbus is going to begin devouring some of its employment base, those jobs in contractors and suppliers whose employment security is part of the motivation for the vast sums of public monies already thrown into the project.
Airbus is probably too big to fail. Cancellation of the A380 is not going to happen, and Airbus will be rescued with whatever money is necessary, WTO be damned. The launch of the A350XWB, according to Airbus' marketing executive, American-born John Leahy, is "imminent." Of course, marketing executives are not hired to say negative things about future projects.
The longer term question for France and Germany, and indeed the entire EU, is how many more public resources the citizenry will tolerate being employed so counter-productively, given the strategic necessity of shifting jobs elsewhere? Given the commitment to a an independent aerospace capability and the historic tolerance for insider dealing, the answer is probably a lot more.
Airlines, passengers, and the aerospace industries of Russia and China will win big. Taxpayers in the EU will lose. Boeing, which uses market signals to decide matters, and which is disciplined by capital markets, is doing quite well under this arrangement, and can always look forward to a possible day of reckoning for Airbus at the World Trade Organization.
In the UK, as you may know, they even tax the TVs in your house. They have someone drive around looking for antennas to catch the cheaters.
I think I read somewhere 114 torched cars a night is an average in France. But those guys are not revolting against taxation -- that's what subsidizes their idle lifestyle in the first place.
No but one employer is emblematic of their economy -- Airbus.
If hourly rates were the most valid comparison, as you imply with your figures, then the instant Democrats force through a higher minimum wage we will overtake the French in your system too.
Yup. You used to be able to buy Renault, Citroen, and Peugeut. NONE of them are sold here anymore because people quit buying them due to poor reliability and plain ugliness.
You haven't a clue. I really get tired of this attitude from people that have spent a few days here and there in France.
I live in a mid-sized city in western France and I teach 22-24 year old graduate school students. I've travelled around much of the country and have been to Paris quite a few times. I do not yet speak French totally fluently, although I do have a pretty good accent. I have NEVER encountered a single French person that has displayed the attitude you are attributing to the entire population. Not a single one. Not en province, not in Paris. I have encountered a number of rude people in Paris, but Parisians are rude to everyone, including each other. You shouldn't take that personally.
I have no doubt that there are people here that think France is supreme and everything else is inferior, just as there are people in the U.S. and every other country in the world that feel their way is best.
However, you cannot paint the entire French population with the same broad brush. They have been gracious and kind and welcoming to me and this place most certainly does not "suck."
As a European, it's nice to hear you enjoy France/Europe. If I had to choose another country than Sweden in which to live, both the US and France would be on the top 10 of my list!
I sincerely wish more Americans as well as Europeans would find out what a rewarding thing visiting and travelling around in eachother's magnificent continents really is (next year I'll travel to Spain, France, Germany and Italy for vacation - but 2008, I've more or less decided to go to the US).
We ought to COMPETE, yes (just like for instance, Swedish companies compete with other Swedish ones and American companies compete whith eachother), but we should never make the mistake of viewing eachother as enemies.
Americans have spilled their blood for the sake of a free Europe.
Europeans soldiers (even from my home country, Sweden) have died in the WOT.
That this had to take place is sad in one way, but it is also a reason to forever look upon on eachother as brothers-in-arms.
Whatever rude or stupid behaviour individiual Europeans have displayd towards Americans, let it be known once and for all that there hundreds of millions of Europeans who will never accept attacks on America.
America is in my heart and will always be. If I, as a Scandinavian European, would have to give my life for the cause of American freedom, I would not regret it. These words are not much more than words. But believe me, a Swede would not lie about this kind of thing, just like few other Europeans or few Americans would.
We will conquer evil and people like Bin Ladin will never be the rulers of The World and the Muslim would never accept a person like that for their leader. If he's alive, he's hiding in a cave like a frightened animal.
Although I was born a lutheran christian and although I feel immigration to Europe ought to be limited to a very large degree, Any muslim who sincerely believes in mutual respect between cultures I consider as an ally in the WOT.
I might agree with you in principle but the American unemployment rate is about 4.7 per cent right now. France? Here's an excerpt of a news article from mid-2005, showing theirs at over 10 per cent:
French unemployment has risen to its highest level in five years, increasing concerns about the strength of France's economic growth. The jobless rate in March, as measured according to the International Labour Organisation (ILO) method, rose by 0.1% from February to 10.2%. The rate is the highest level seen since December 1999. http://news.bbc.co.uk/2/hi/business/4496797.stm
That cannot be right! I do not think we manufacture anything in the us anymore. Most of it comes from China and the good stuff from Japan!
Note that the GDP of France is the same as the state of California Why doesn't Arnold Swartznegger have a seat at hen UN?
"Yup. You used to be able to buy Renault, Citroen, and Peugeut. NONE of them are sold here anymore because people quit buying them due to poor reliability and plain ugliness."
This might be true.
However, here in Europe, especially Peugeot are admired for their appealing design.
In Sweden (my home country), Peugeot are immensely popular among young women and as a second car/shopping car.
Most swedes however would claim Volvo is a much better car.
I'm saving up money for a XC 90 SUV (presently got 1/3 of the required money on my bank account)
Now, THIS is what I call a CAR:
http://www.volvocars.us/models/xc90/
They used to call it 'Protestant work ethic' but I think that has been PC'd out of polite society.
Meanwhile, Porsches are around, insurance on Porsches costs about as much as the car after taxes, import, and premium sales prices. They are also a pain in the butt to maintain.
Beemers, Volvos, MB, and that stupid faux-Mini are all over the place on the two coasts.
You are right about Japanese cars - which I think says more about self image and aggressive marketing than anything else. (Note however, that they are quite common in europe, are also believed to be qualitatively superior to US manufactured cars, and have moved most manufacture into the US - we are buying the brand, not the source.)
Second:
What you miss here is that many of us take France as an illustration of what we DO NOT WANT in the USA.
Socialism, arrogant and misplaced pride (all your knocks about Americans aside, whenever I've been overseas Americans are the most polite tourists to be found), pompous and result free diplomatic airs that are reflected in both the EU and the UN...the list goes on, it includes airliners that are just plain not up to MacDac/Boeing, and can be crowned with our being sucked into two world wars in which France provided much of the playing field.
There is also the side note provided by 9/11 after which we (and apparently the Brits) stepped away from the 'terrorist-as-a-police problem' model that Europe seems still to practice. (By the way, I'm simply in awe of how well it has been working in France lately.)
You would be correct to say that we are isolated by seas, you would also be correct to note that we share oceans with Asia as well as with Europe, that we have stepped away from your model both by rebellion and by commercial and diplomatic necessity.
Finally, I appreciate your comment on eating well, we're having steak, artichokes, cheese, salad and a domestic wine tonight - again.
"Note that the GDP of France is the same as the state of California Why doesn't Arnold Swartznegger have a seat at hen UN?"
You've got a point there, my FRiend!
Schwarzenegger would probably do a good job. As you might be aware of, he's popular here in Europe as well.
On the other hand, why don't the Scandinavian countries have an ordinary seat in the UN Security Council Resolution?
In fact, we finance the UN to a large extent (I'm not sure exactly how much exactly, but we make a large financial contribution).
Remeber, Scandinavia has less than 30 million inhabitants altogether.
Despite the fact that we're the richest part of the Earth (spare Luxembourg), that's quite an achievment.
Why we agree to do this?
This is reason enough:
http://www.un.org/Overview/rights.html
Civilization will prevail.
"Most swedes however would claim Volvo is a much better car. "
As would most any American old enough to remember French automobiles.
And that car you link to certainly looks like a nice ride. As a matter of fact, to me it looks like one of the nicest Ford Motor Co. products available.
What a nice thread this is developing into!
It could all have deteriorated into mud throwing between France-bashers and defenders of France/Europe, but we've managed to steer away from that scenario.
Sorry if I perhaps sounded a bit anti-American in some posts of mine above. I hope it shows elsewhere that I'm very far from being anti-American.
Anyhow, This is something I feel both American and Europeans ought to be aware of:
- It's stupid to think something like 50-60% of the US Americans are poor. A majority of European socialists should ask themselves why they often can't afford to buy a decent car or to travel around the US and find out about what reality looks like for themselves (ALL - without any exception whatsoever - Europeans that have been to the US that I've talked to have said the US is a great country!!! And I agree; the people/nature/architecture/food/culture is awesome, although Fla is the only State I've visited so far)
- The US GDP/Capita is a very, very high one, BUT proud Americans ought to note the performance of a European country like France PER HOUR (see list above). Somethings might be dead wrong concerning french politics but you can't deny the obvious fact that the french work very smart. Imagine what the performance of french economy would be if they worked like Americans or Scandinavians (We Scandinavians work more hours/week than the french. In Western Sweden where I live, everyone is working Saturdays/Sundays - the prime root to this being the fact that the demand for swedish made cars like Volvo and SAAB is at an all time high. Makes me feel proud as a Swede!)
By the way, tonight I'm having reindeer steak and argentinian red wine!
Please forgive me, Rudolf!
""Most swedes however would claim Volvo is a much better car. "
As would most any American old enough to remember French automobiles.
And that car you link to certainly looks like a nice ride. As a matter of fact, to me it looks like one of the nicest Ford Motor Co. products available."
Thank you for these words. When foreigners say appriciative things about Swedish made products/the products of Swedish companies, we always take it personally.
And why shouldn't we.
Successful companies, whether it's Sony, Boeing, Peugeot or IKEA are the backbones of their respective industrialized nation. In the prolongation, they're the backbone of Western Civilization.
Presently, I'm using my Dell computer in order to participate in this thread. An excellent American product that is very popular here in Sweden and very apt for my personal needs.
EU manufactures opt for robotics rather than another permanent employee. When the product cycle is over they unplug the machine. US manufactures hire temporary employees. When the product cycle is over they lay them off.
The US method (hire/fire) total cost are less, more people have jobs. Taken to an extreme the EU plant would have only one employee to turn the machine on and off as needed. The corporation would then pay sufficient taxes so that everyone could stay on the dole.
"Americans ought to note the performance of a European country like France PER HOUR
EU manufactures opt for robotics rather than another permanent employee. When the product cycle is over they unplug the machine. US manufactures hire temporary employees. When the product cycle is over they lay them off.
The US method (hire/fire) total cost are less, more people have jobs. Taken to an extreme the EU plant would have only one employee to turn the machine on and off as needed. The corporation would then pay sufficient taxes so that everyone could stay on the dole."
This is an interesting perspective.
Another way of putting it is this;
Americans get what they desire in life:
Hard work, discussable standards of lunching and a luxury house and a decent SUV.
The French get what they desire out of it:
Fairly hard work, quality time to go with every meal and a car that's small but well designed.
LOL... Of course they did, after the allies' victory in WWII, a full 227% of all the French people had been valiantly fighting in the French underground and alongside the allies. That so few were seen to be fighting is an enduring mystery...
You watch, after the Iraq war and the larger war on terror, a similar number of French will have been supporting and fighting shoulder to shoulder with America.
/S
All right, what does this have to do with France?
------
LOL... A question well asked.
"All of them had relatives who had offered their life defending the TRUE France.
LOL... Of course they did, after the allies' victory in WWII, a full 227% of all the French people had been valiantly fighting in the French underground and alongside the allies. That so few were seen to be fighting is an enduring mystery...
You watch, after the Iraq war and the larger war on terror, a similar number of French will have been supporting and fighting shoulder to shoulder with America.
/S"
I can't deny that you made me laugh.
BUT, You indirectly insult the french. Please continue speeking your mind. BUT, Think twice about being a France-basher. This April, my father and I rented a chateau in a small french town (actually the very location makes it a "hotel" meaning a chateau placed in a surrounding town).
I went to the local church and read the names of local sons and daughters who offered their lives for the sake of the Freedom of France.
I take pride in being of Viking ancestry, but compared to what these men and women gave up their life for in order to forward a noble cause, I'm not even a midget.
Civilization and Freedom COSTS.
I guess I'm just not trying hard enough to find them. Even in Paris, I've never been treated like I was "less than dirt." (I've even had a few Parisians be positively charmed by the presence of an American girl.)
Parisians are rude, but, as I explained, that's how they treat everyone. My French husband hates going to Paris just because he dislikes Parisians so much.
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