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Airbus Blamed for Poor French Economic Growth
Yahoo! News ^ | Thu Nov 16, 4:30 PM ET | Thomas Lifson

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.



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KEYWORDS: airbus; airbust
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To: TimSkalaBim

And by a schitzophrenic girl, no less.


If a delusional teenager can conquer/liberate France, it will be easy for the Muslims to do the same.


21 posted on 11/18/2006 10:57:30 PM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: WesternCulture

Except that France will never ever fire on all cylinders, ever again.

They are too entrenched in the "new European model" to ever back out - and that's going to screw them.


22 posted on 11/18/2006 11:04:30 PM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: TimSkalaBim

"Aside, I doubt that car-burners could much improve the A380. Take over the country? It's been done before."

Has it ever been "held" by anyone?

I've heard Nobel Prize winner Tolkien once deemed this to be more or less impossible.


23 posted on 11/18/2006 11:10:23 PM PST by WesternCulture
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To: TimSkalaBim
Take over the country? It's been done before.

Anybody taking over France ultimately has regretted it.

24 posted on 11/18/2006 11:18:21 PM PST by KellyAdmirer
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To: WesternCulture
[ If that's actually the case, it proves that it's possible to take over an entire country simply by setting fire to some ill parked cars... These clever men are to be the Masters of the Universe one day. ]

Not really... When you have aborted your next generation(s) and the Muzzies have bred themselves into power players.. you're SCREWED... with a French kiss...

25 posted on 11/18/2006 11:21:12 PM PST by hosepipe (CAUTION: This propaganda is laced with hyperbole)
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To: Spktyr

"Except that France will never ever fire on all cylinders, ever again.

They are too entrenched in the "new European model" to ever back out - and that's going to screw them."

I've met with several french people and all of them where very friendly.

Furthermore, their industry is much more productive than that of most countries including Japan and the US, partly because of the usage of very advanced nuclear power.

Why do republican Americans hate France?

Seems like some obsession.

French politicians are useless.

The french are the first to admit this.

The french are actually pretty cool folks. My father and I rented a chateau in the Loire last spring and I remember the locals as being very intelligent, stern, aware and politician hating people.

All of them had relatives who had offered their life defending the TRUE France.




26 posted on 11/18/2006 11:22:27 PM PST by WesternCulture
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To: Paleo Conservative
The fact that the Airbus was 2 yrs late has absolutely nothing to do with the 35 hour work week. Non! (/sarcasm)
27 posted on 11/18/2006 11:33:47 PM PST by Tamar1973 (I find your lack of faith disturbing--Darth Vader, Ep. IV)
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To: WesternCulture

I speak French fluently, with a Parisian accent et avec l'accent etranger. I've travelled to France a few times. The place sucks. Sure, the country folk can be friendly, but most French appear to live in the cities. And les habitants des grandes villes are anything but friendly. They are rude, stuck up, prissy people who believe that they are gods and anyone not French is less than dirt. Their literature confirms this.

"Industry is much more productive" - BS. They may make more items, but those items are cheap, shoddy workmanship. A good example is roller bearings. Timken has plants in Poland, the US, and France where they all make the same parts. Guess which ones have consistent QC problems and wear out faster.

You might also find it instructive to review the process for making something out of carbon fiber, and then note that Airbus does not run 24-hour shifts.


28 posted on 11/18/2006 11:35:05 PM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: KellyAdmirer

Anyone taking over France has always had the same problem - once you take over France, you're stuck with it. All it does is suck your financial resources while attempting to take power away from you and complaining if you object.


29 posted on 11/18/2006 11:39:02 PM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: WesternCulture
All of them had relatives who had offered their life defending the TRUE France.

I suppose you mean relatives in the French resistance during WWII. Not your typical Frenchmen.

In fact, if you want to see how proud the French are of their role in WWII, go visit the Napolean Museum (military museum) in Paris. There are rooms and rooms full of medieval armor, Napoleonic era artillery, etc. on display. Quite impressive. Then you get to the WWII wing. Needless to say it's very small; probably 10 percent of the size of the Imperial War Museum in London.

Take over the country? It's been done before." Has it ever been "held" by anyone?

Ask the Germans. The reasons the Champs-Elysées has always and is still lined by trees is so the Germans can march in the shade;)

30 posted on 11/18/2006 11:56:12 PM PST by zipper
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To: WesternCulture
Cheesus!

You take the name of your favorite cheese in vain?

31 posted on 11/18/2006 11:58:49 PM PST by TimSkalaBim
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To: WesternCulture
If that's actually the case, it proves that it's possible to take over an entire country simply by setting fire to some ill parked cars...

They're not doing it by burning cars. Check the birthrates in France and see who it is having all those babies.

It ain't the French.

L

32 posted on 11/19/2006 12:06:04 AM PST by Lurker ("A liberal thinks they can sleep in and someone will cover their lame ass."Ted Nugent)
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To: Spktyr

"I speak French fluently, with a Parisian accent et avec l'accent etranger. I've travelled to France a few times. The place sucks. Sure, the country folk can be friendly, but most French appear to live in the cities. And les habitants des grandes villes are anything but friendly. They are rude, stuck up, prissy people who believe that they are gods and anyone not French is less than dirt. Their literature confirms this.

"Industry is much more productive" - BS. They may make more items, but those items are cheap, shoddy workmanship. A good example is roller bearings. Timken has plants in Poland, the US, and France where they all make the same parts. Guess which ones have consistent QC problems and wear out faster.

You might also find it instructive to review the process for making something out of carbon fiber, and then note that Airbus does not run 24-hour shifts."

As the good people of both America and France hate french politicians, I can't get into my head what the problem is.

Sissy attitudes and thoughtless mud throwing.

A lot of cheap crap is produced by all nations, even the the most technologically advanced ones.

Do you honestly believe ordinary Europeans find the material "standards" of the US especially appealing?

No offense, I love several aspects of the US, but the very quality of a major part of the goods produced by US industry make these particular products unsellable throughout "middle class" Europe.


33 posted on 11/19/2006 12:10:46 AM PST by WesternCulture
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To: Paleo Conservative
Villepin promised $103 million in government loans and guarantees for Airbus suppliers

Last spring there was a news report that France had to borrow money for the first time to pay for government bureacracy payrolls. Now they borrow to pay vendors for defunct contracts for canceled sales of Airbus.

What next will France borrow money for? Welfare hush money for the islamics?

34 posted on 11/19/2006 12:11:36 AM PST by x_plus_one (Franklin Graham: "Allah is not the God of Moses. Allah had no son")
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To: TimSkalaBim

"Cheesus!

You take the name of your favorite cheese in vain?"

Cheesus!

http://www.poizenideas.com/cheesus/


35 posted on 11/19/2006 12:13:53 AM PST by WesternCulture
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To: WesternCulture
Sissy attitudes and thoughtless mud throwing.

Cultural intransigence more likely.

36 posted on 11/19/2006 12:14:21 AM PST by x_plus_one (Franklin Graham: "Allah is not the God of Moses. Allah had no son")
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To: Flash Bazbeaux

Airbus is like that saying: An elephant is a horse designed by committee.


37 posted on 11/19/2006 12:16:34 AM PST by x_plus_one (Franklin Graham: "Allah is not the God of Moses. Allah had no son")
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To: WesternCulture
One ought to acknowledge that a future France, working on all cylinders, actually could contribute A LOT to overall European development

Don't you know that france has outlawed hard work? Why would anyone think they would want to change now that welfare pays for everything?

38 posted on 11/19/2006 12:18:39 AM PST by x_plus_one (Franklin Graham: "Allah is not the God of Moses. Allah had no son")
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To: Lurker

"If that's actually the case, it proves that it's possible to take over an entire country simply by setting fire to some ill parked cars...
They're not doing it by burning cars. Check the birthrates in France and see who it is having all those babies.

It ain't the French.

L"


Another expert on human reproduction.

Just kidding ;-)


39 posted on 11/19/2006 12:20:13 AM PST by WesternCulture
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To: WesternCulture
I think your figures are wrong or outdated. When they only work a 35 hour work week they are at a disadvantage in terms of GDP. Americans are notoriously hard workers. Frenchmen are notorious for going on strike with little or no notice, and for taking vacation for most of the month of August.

A list of countries of the world sorted by their gross domestic product (GDP) at purchasing power parity (PPP) per capita (reflects differences in cost of living). International Monetary Fund data for the year 2005.

Rank Country GDP (PPP)
$ per capita
1 Luxembourg 69,800
2 Norway 42,364
3 Republic of Ireland 41,399
4 United States 40,610
5 Iceland 35,115
6 Denmark 34,740
7 Canada 34,273
8 Hong Kong 33,479
9 Austria 33,432
10 Switzerland 32,571
11 Qatar 31,397
12 Belgium 31,244
13 Finland 31,208
14 Australia 30,897
15 Netherlands 30,862
16 Japan 30,615
17 Germany 30,579
18 United Kingdom 30,436
19 Sweden 29,926
20 France 29,187

A list of countries of the world sorted by their Gross Domestic Product (nominal) per capita (does not reflect differences in the cost of living). International Monetary Fund data for the year 2005.

Rank Country GDP
per capita
1 Luxembourg 80,288
2 Norway 64,193
3 Iceland 52,764
4 Switzerland 50,532
5 Ireland 48,604
6 Denmark 47,984
7 Qatar 43,110
8 United States 42,000
9 Sweden 39,694
10 Netherlands 38,618
11 Finland 37,504
12 Austria 37,117
13 United Kingdom 37,023
14 Japan 35,757
15 Belgium 35,712
16 Canada 35,133
17 Australia 34,740
18 France 33,918

 

 


40 posted on 11/19/2006 12:22:54 AM PST by zipper
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