"Actually, the dollar bottomed in June, and has been going up since. The chief causes of Airbus's failures are incompetence, infighting among management, poor design, poor planning, and major delays in development."
Posted on 10/10/2006 6:44:10 AM PDT by Righty_McRight
PARIS - The new chief executive of Airbus pledged job cuts at the troubled planemaker and said Tuesday that its biggest handicap against rival Boeing is the weak dollar, not deep production delays for its superjumbo.
Parent company EADS named one of its CEOs, Louis Gallois, to lead Airbus on Monday, after his predecessor Christian Streiff resigned just three months into the job. Gallois also continues to serve as co-chief of European Aeronautic Defence & Space Company NV.
Gallois said on Europe-1 radio Tuesday morning that a new recovery plan "will be painful, because there will be job cuts."
He gave no figures or other details of the recovery plan, except to say that the company would discuss with employees and unions "how to move forward together."
The CGT union said last week the predicted cuts would involve about 2,000 employees at four French facilities.
Gallois did not focus on the delays with the A380 superjumbo that have sent EADS stock sinking this year and frustrated airlines worldwide. Instead, he focused on the weak dollar.
"Airbus' principal handicap vis a vis Boeing is the dollar that has collapsed," he said. Airbus' expenses are largely in the stronger euro.
Workers "know the constraints we live under, they know the dollar exchange rate and they know that the dollar will not recover," Gallois said.
Gallois also said that he disagreed with Streiff's warning that it would take 15 years to turn Airbus around.
Streiff's departure dealt a fresh blow to crisis-hit Airbus. The planemaker, which stunned investors in June by doubling the A380 superjumbo's production delay to one year, doubled it again this month to two years and said the holdups would wipe a total of 4.8 billion euros ($6.1 billion) off EADS profits over four years.
Streiff drew up a cost-cutting turnaround plan for Airbus that enjoyed strong support from EADS directors, but he clashed with the board over how the plan should be implemented and how much control he would personally exercise, according to three officials familiar with the discussions.
In an interview in Tuesday's Le Figaro, Streiff said he had not been allowed the "necessary operational powers" to do the job effectively and welcomed as "a step in the right direction" the combination of the Airbus and EADS roles for Gallois.
EADS owns 80 percent of Airbus and is tightening up supervision of the civil jet unit as it acquires the remaining 20 percent from Britain's BAE Systems PLC.
After concentrating massive resources on the superjumbo, Airbus was taken by surprise by Boeing's two-engine 787, which delivers better fuel economy than older four-engine Airbus jets in the same size category — a sales argument that has grown more persuasive with higher fuel prices.
Airbus took orders for 226 jets through Sept. 30, compared with the 723 announced by Boeing for the year through Oct. 3.
Shares in European Aeronautic Defence and Space Co. fell Monday ahead of Streiff's resignation but rose slightly Tuesday morning, gaining 0.55 percent to 20.27 euros ($25.55).
"privatization and a new economic order within the company"
If they couldn't go private without massive state money,it sounds like the free market valued the company much lower that the state or Gallois valued it. Taking it private would have resulted in an even bigger boondoggle than they have today. Gallois looks like a fraud.
This is one of the few times when that phrase is correct.
If having a weak currency is an advantage, he should run his budget in French Francs.
It's hard to see that happening either. I believe VW just had to guarantee 10 years of job security just so their people will work more hours per week -- up to about 33 hours now. Airbus will probably lower their weekly hours, lowering actual paycheck outlay. But they still have to pay the same benefits per person, costing a lot more than layoffs for the same number of hours worked.
Asset inflation. i.e. housing and land prices.
In the run-up to the invasion of Iraq, one of the themes that the left put out in large quantities in media venues around the world was that Middle East oil nations would switch to the Euro and the Euro would rise in value, eclipsing the dollar, and that rising Euro would ruin the US economy.
As I tried to tell them, the artificial rising of the Euro would saddle Europe with industrial goods they could not export, against lower-priced American goods.
And, that is what happened.
According to David Malpass, conservative Chief Economist at Bear Stearns:
Only about 21% of our total household net worth comes from home equity. We own a lot of liquid assets which means our wealth is rapidly increasing even when home equity isn't considered.
Federal Reserve Flow of Funds (page 110 of 124) pdf.
To achieve this incredible wealth we have to be saving and investing. The problem is with how the government calculates the rate of savings.
I wonder if they complained when they had to pay the late penalties in dollars, and I wonder if the airlines complain when they have to buy oil in dollars.
A strong Euro means that European consumers can buy imported goods less expensively. However, it makes manufacturing items in Europe more expensive.
China has purposefully kept the value of their currency low and a fixed proportion of the dollar for this very reason.
They do not want Chinese people importing foreign goods. They want to fullfill domestic needs internally, and have cheap labor that is forced to buy domestically.
When taken to the extreme that China has, deflated currency harms workers.
However, having the dollar a bit weak compared to the Euro helps grow our economy, and hurts Europe's. It's more expensive for American consumers to buy European goods or visit Europe, but for most Americans it doesn't have a large impact.
Increased imports does appear to be having a significant impact on our economy.
I really don't understand why the Euro is so strong right now, but it's really restricting their economy which is experiencing near stagnation. With the hit Airbus is taking, they very well may be headed for a recession if not a depression.
Airbus is large enough to be a significant portion of the European economy, and since they provide such a strong safety net for workers, unemployment increases drag on their economy even more than on ours.
Europe needs to face reality soon and figure out that their socialist dreamland is crumbling under it's own weight. They either need to address some of the problems of their implementation of socialism, or they are in for some very bad economic times.
Not because they don't have skilled workers. Not because they don't have the capability of producing quality products.
Their problem is that their system simply has too much dead weight, and they insist on providing very well for that dead weight so that it is dragging down the majority.
Interesting. Thanks for the info. Housing must have accounted for a huge portion of the increase, regardless of what % of total assets that it covers?
"Actually, the dollar bottomed in June, and has been going up since. The chief causes of Airbus's failures are incompetence, infighting among management, poor design, poor planning, and major delays in development."
I heard Boeing is about to hit the A320 with a new 737 and try to end all of that.
I can't understand how they could have not standardized their software prior to starting the A380 program. Multiple software versions on their most important design package were a disaster waiting to happen. I'm deferring several software upgrades right now to avoid compatibility problems till after the company I work for finishes a current project.
I don't understand the logic too well either. Somewhere I read that they just didn't like that Dassault (who makes CATIA) was also an aviation competitor?
Is it a management flaw? Is it compatibility issues as in your case? Some software is backward compatible and some are not. Did you say you work on CATIA or AutoCad?
I wonder if some of Airbus's problems aren't due to their stubbornness or some French socialist culture fear of saving face. (I'd glad to be a capitalist, lol).
But Boeing uses the same software too and doesn't seem to mind that Dassault is a competitor in aerospace.
I use AutoCAD Map 2002. It has some extensions for GIS. I have the upgrade to the 2007 version but don't dare install it till we get our current projects finished. At some point I'd really prefer to switch to ArcGIS, but for right now the 2007 version of AutoCAD gives much needed enhancements like being able to print in 16 million colors instead of jut 256. There are various levels of backward compatibility, but my brother and I are very good at finding the features that aren't compatible.
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