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.
Do a quick check of hospital birthing rooms and see how many veils and head covers you see squeezing out all those kids.
Then cross reference that with a list of the most popular baby names.
What you learn should scare you.
France is doomed and it's going to happen in less than 50 years.
L
Um, roller bearings are *not* supposed to be cheap crap. The French, Polish, and American plants are run by Timken, and each produce the exact same models of roller bearings. Yet the French ones consistently have problems. Why, perchance, do you think that is?
which corage no Frenche man hath like to the English man. It hath ben often seen in Englond that iii ir iv thefes, for povertie, have been hardy to robbe iii ot iv true men.
Wherefor it is right seid that few Frenchmen be hangyd for robbery, for that they have no hertys to do so terryble an acte.
There be therefor mo men hangyd in Eglnd in a yere, for robberye and manslaughter, than ther be hangid in Fraunce for such cause of crime in vii yers."
The birth of Britain, Winston S. Churchill, 1965 - A History of the English-Speaking Peoples
"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?"
Was hard work ever allowed in France?
Actually, let's get real, a well educated citizen of France (In Arabic Tounge %¤¤#) would just laugh at us if we continued like this.
Instead, I think ineffecient Americans ought to ask themselves why they work like slaves and still can't afford the Porsche.
Several Europeans do not own a flashy car like a decent Porsche, but A GREAT DEAL OF US of us DO drive very nice Porsches, Audis, Volvos, Beamers etc.
The best selling car in the US?
The Toyota Camry.
Someone told me we eat well to...
Non c'e' un altro posto al mondo ORA
Che mi fa star meglio della mia cucina!!!!!!!!!!!!!!!!!!!
If you read the news you see that those cars are bought with borrowed money. France is borrowing to pay for payrolls, welfare and anything else. They are trying to borrow out of a financial bind. We all know the picture of the French guy taking a wheelbarrow of paper money to buy a loaf of bread in the 1930's. It's just a matter of time.
"I think your figures are wrong outdated."
Why?
Because you wish them to be?
I think more of argumentation is needed.
Put some effort into it.
Sorry, I accidentally managed to erase the word "or" in my quotation of your post.
Sorry, partner.
You wrote;
"I think your figures are wrong or outdated."
Gen. Webb: Kindly inform Major Heyward that he has little to fear from this General Marquis de Montcalm in the first place; and scant need of a colonial militia in the second because the French haven't the nature for war. Their Gallic laziness combines with their Latinate voluptuousness with the result that they would rather eat and make love with their faces than fight. link here
Why would I wish to purchase a Porsche? I share Master Jeremy Clarkson's opinion that Porsches are rehashed Volkswagens with the engines in the wrong end and an enormous pricetag attached.
That said, you might want to go check your numbers. Americans *can* afford Porsches, since WE BUY MORE OF THEM THAN ALL OF EUROPE COMBINED. And that is the case for most of the Euro makers - at least those that didn't get kicked out/laughed out/booed out of the US market.
"Instead, I think ineffecient Americans ought to ask themselves why they work like slaves and still can't afford the Porsche.
If you read the news you see that those cars are bought with borrowed money. France is borrowing to pay for payrolls, welfare and anything else. They are trying to borrow out of a financial bind. We all know the picture of the French guy taking a wheelbarrow of paper money to buy a loaf of bread in the 1930's. It's just a matter of time."
Eh..., I think there are one or two Americans around who're burdened with debts.
Am I wrong?
All right, what does this have to do with France?
...march in the shade.
LOL!
"Why would I wish to purchase a Porsche? I share Master Jeremy Clarkson's opinion that Porsches are rehashed Volkswagens with the engines in the wrong end and an enormous pricetag attached.
That said, you might want to go check your numbers. Americans *can* afford Porsches, since WE BUY MORE OF THEM THAN ALL OF EUROPE COMBINED. And that is the case for most of the Euro makers - at least those that didn't get kicked out/laughed out/booed out of the US market."
I guess this could very well be true. Many Americans are vreally rich.
I'm not denying the US GDP/Capita is a very high one.
However, It ought to be acknowledged that the productivity and efficiency of European Industry in terms of plain money making sets an example for all of Mankind.
I admire the US, don't get me wrong.
All right, what does this have to do with France?
Um, no. When adjusted for cost of living, both the US and Japan beat out most European countries.
By the way, why, if it's such a model of productivity and efficiency, are those two paragons of European industry Saab and Volvo now owned by AMERICAN companies because they couldn't make it on their own?
How much time have you spent in the US? Have you ever been anywhere save the coastlines?
Compared to a lot of Europeans, we *are* really rich.
Remember, they end up paying staggering amounts of tax. A significant percentage of the European populace cannot afford a car, because of the taxes and fees involved in owning even one; compare that with here, where even some of the poorest people have multiple automobiles.
I earn a decent living as a consultant, with a middle-class lifestyle. I own two very nice Jaguars and a battlewagon Jeep. A friend of mine from Oslo, Norway came to visit not long ago and he expressed surprise at my "wealth".
"Um, no. When adjusted for cost of living, both the US and Japan beat out most European countries.
By the way, why, if it's such a model of productivity and efficiency, are those two paragons of European industry Saab and Volvo now owned by AMERICAN companies because they couldn't make it on their own?"
Correction: The PERSONAL VEHICLE divisions of SAAB and Volvo were bought by GM and (respectively) Ford.
Anyhow, what are you talking about? Productivity was never the problem in the case of Volvo and SAAB selling these divisions. Coping with small series in connection with huge development costs on the other hand, WAS a common dilemma to both of these former divisions of Volvo/SAAB.
Let's return to the original question in this manner;
What kind of money does GM/Ford make on a car produced on American soil?
Something like - 1000 dollars
A SAAB/Volvo produced in Europe?
around + 1000 dollars
Japan is too small and the US is too sparsely populated in order to compete with a fully integrated European industrial apparatus.
On the other hand, Europe is very heterogeneous and that is something that could prove to be disadvantageous in terms of reaching maximum levels of productivity.
"I guess this could very well be true. Many Americans are really rich
How much time have you spent in the US? Have you ever been anywhere save the coastlines?"
No, I've been to Florida. That was in the early 1990's.
Florida was at that time considered to be a pretty rich part of the US.
I saw very little of affluence even in a "well off" part of Miami like for instance "Coral Gables", but the people were extremely friendly and open everywhere.
I handed out 20 and 50 dollar bills for tips at different places and I remember the recipients staring at these bills like they'd never seen green before.
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