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.
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.
I haven't visted Paris but i HAVE visited France.
Why are some french people rude towards foreigners?
Maybe this has got something to do with how France has been treated by foreign powers throughout history.
Stalin defeated nazism. US/British/Aussie troops took care of what was was left of it. Does this give grandsons/grandaughters of the US troops an eternal right to insult the sons and daughtthers of France?
Sorry, Forgot that it ought to look like this:
"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."
I haven't visted Paris but i HAVE visited France.
Why are some french people rude towards foreigners?
Maybe this has got something to do with how France has been treated by foreign powers throughout history.
Stalin defeated nazism. US/British/Aussie troops took care of what was was left of it. Does this give grandsons/grandaughters of the US troops an eternal right to insult the sons and daughtthers of France?
This brings to mind an American expression:
Freedom is not free!
"Civilization and Freedom COSTS.
This brings to mind an American expression:
Freedom is not free!"
- What every child ought to know.
I don't know. Why are people anywhere rude to people different from them? It's not like this only happens in France.
I think some foreigners perceive that they get treated rudely because they go to a foreign country and act just like they do in their home country. My French teacher in the US told us the story of his (French) aunt who visited him in the US. They went to a restaurant and she refused to speak to the waiters in anything but French. Obviously, the English-speaking waiters reacted and this lady probably thought they were rude.
We were in a restaurant here late one evening when an American couple came in asking for directions to a bed and breakfast outside of town. They spoke English to the restaurant owner, who does not speak English. Luckily for them, I heard them and my husband and I helped them get the information they needed. The husband was nice but I found the wife to be a little demanding and rude.
I've always done my best to blend in and conform to the local customs and culture. For the most part, if you at least attempt to speak some French (even if it's just a parlez-vous anglais) and treat people politely and with respect, that's what you'll get in return.
As for insults, I think it's time all sides dropped them.
We have a friend here who visited Sweden this summer. He sent us a postcard of Stockholm and it looks beautiful! He really enjoyed his visit there and encouraged us to go if we ever had the chance.
It will have to wait though, since I've already decided that our next European trip will be to London. I've never been and it's a shame to be so close and not make the time to go!
Did the notations in the local church indicate when those sons and daughters offered their lives?
During the Great War, the general indications are that the French actually fought heroically. However, the exercise of "young men trying to wear out machine guns with their chests" seems to have caused the populace to lose their interest in actually defending the country.
The French seem never to have recovered from the Great War.
"Did the notations in the local church indicate when those sons and daughters offered their lives?
During the Great War, the general indications are that the French actually fought heroically. However, the exercise of "young men trying to wear out machine guns with their chests" seems to have caused the populace to lose their interest in actually defending the country.
The French seem never to have recovered from the Great War."
The years (and perhaps the specific dates) although the locations of their death were mentioned.
Before engaging in further discussion of this matter, we should ask ourselves when the last time our own neighborhood made a sacrifice like that.
Well, why do you always meet with such strange behavior when travelling to foreign countries?
Without trying to lecture (I've travelled some but I'm well aware you have too):
- Customs ARE different from country to country
- People in the service trade you encounter while abroad sometimes get a little nervous because of the very fact that you ARE a foreigner. Especially if you ARE acquainted with the national culture and you, therefore, know the name of the game. Say you're a citizen of the US who speak some french (I guess you are such a citizen of USA), in that case a french hotel receptionist etc, might feel he/she doesn't know how to deal with a person like you. Strange but true. Perhaps you should refrain from speaking french at all?
I often visit Italy and Germany. I just lay back, order giant tankards of beer, la mia bella pranzo/cena and make new friends wherever I go.
"la mia bella pranzo"
Not proper italian, I know.
Si dice "Il mio bello pranzo", scusi.
Anyhow. The italians tend to forgive me for these shortcomings of mine.
I love Italy.
I'm not quite sure what you mean by "our neighborhood", since my neighborhood and your neighborhood appear to be separated by a rather large body of water.
That notwithstanding, the English also suffered horrifically in The Great War.
There was a discussion here a few weeks back regarding a war memorial in Scotland showing the names of several hundred men who were lost in The Great War.
The names of those lost in WWII numbered in single digits. The Great War wiped out the entire adult male population of the town.
Yet, when the Hun came a-knocking, the English stood up behind a man who said "...we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender,..."
I've been reading your comments, and I really appreciate them, because my gut reaction is that all French are lazy snobs and their country is going down the toilet. I remember going to Paris in 1991 and being treated very rudely (I think they thought me and my sister, ages 14 and 10, were going to rob the mall!). The recent student riots did not help my opinion, nor all the socialism.
But then, along with your comments, I remember how nice a lot of the French exchange students that visited us in Alabama. And my parents went to Paris a few months ago and had a wonderful time, the people were nice and everyone looked well off.
Is it possible there is a "red/blue state divide" in France, much like here?
Thanks for any insights!
BamaGirl
I have never met an American worker (any level) who did not need to believe that his or her work was at the core of the business. Some really, really, lame time servers have advised me that their particular contribution makes the whole thing work.
Most European workers I've met either,
(a) Stood by the 'we are superior' doctrine without an iota of support, or
(b) Needed to believe that their equally lame or not lame contributions would provide for this year's vacation and maybe a new pair of Levis.
I really wonder if that is the breaking point, Americans need to believe they are a part of the performing end of society and Europeans need to believe that a performing society will carry them with it.
Both workers and the system of labor/production have developed to support those needs in accordance with the political theories of the day, grafted to the political theories of the day before, and so on...........
(I'm sort of a MacDac products fan, but their management and last lord and master sucked rusty canal water.)
Understand that Harley's are pretty popular there as well.
I still own my old Brits but it is pretty much a Hog and Rice Burner world over here today.
I don't meet with strange behavior. I was offering a theory as to why others might have had negative experiences in France.
I'm American, I live in France, I speak French to everyone here and have never had a problem. Not speaking French is not an option and French people have proven themselves quite capable of dealing with expatriates living in their country. (There are a lot of us.)
I can help you out here. I live in France and let me assure you the country is not going down the toilet, contrary to what many posters here would have you believe.
You can't say "All (insert nationality here) are..." about any group. The popular stereotype that the French are lazy snobs is not true. Are there lazy, snobby French? Well, of course, just as there are lazy, snobby Americans. My French husband and all of our French friends work very hard and it's often a chore to pry one of them out of the office when you have somewhere to be.
My husband works for the government and technically has a 35-hour work week but he always works a lot more than that and doesn't get paid for it. He has a job to do and he will get it done in however many hours it takes.
I don't know exactly what you mean by the "student riots" but the burning car riots were different from the student protests over a new employment contract. The student protests did not turn violent, other than by some of the car burners who saw an opportunity to cause some trouble and took it.
Are you truly surprised that there are "well off"-looking people in Paris? Do people really think this is a Third World country?
God forbid! Some people have a twisted sense of humor,(I presume that you were joking?) After WW 2 France had a population of about 30 million with 60 million members of the resistance,(your underground )( the whole population was on its knees denying any involvement with the Nazis) if the children of French parents were smart,France would have a population of zero French, but thanks to a power greater than noi, the French are still in France and if we all pray hard every night maybe they will stay there.
Thanks for your input. Do you live in the suburbs or the city? The reports say that the French keep all the Muslim, dark skinned immigrants out in the suburbs, and there is little integration for these peopl into society. Is it true that the police refuse to go into some parts and that they are ruled by Sharia law?
When I meant student riots I was referring to the protests by students when it was possible that they could be fired. But also that does bring up the Muslim riots that lasted for days. What was the local perspective on that?
I'm not trying to put you down or your culture, but this is what is reported on this side of the Atlantic, and if you have any extra data/refutations I'd appreciate it. The US has a lot of the same issues, we had the LA riots, Cleveland riots, etc., but I guess I'm just not used to expect that same kind of behavior in France.
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