Airbus struggles: A killer fact analysis

791px-farnborough_air_show_2006_a380_landing.jpgStrategic decisions at Airbus have been increasingly mired in political wrangling. Killer facts appear to include serious production delays difficulties in France; job preservation priorities of French and German politicians, share disposals by BAE to Airbus parent EADS, and leadership changes as the political, economic and technological challenges play out. Leader Louis Gallois will have to find some wriggle room to secure the restructuring required for the company.

Update

Considerable changes have occured at EADS since this post was first written. These can be tracked through the Airbus posts, including details of the corporate restructuring. The longer term Power8 plan seems still on the agenda, but delayed. Angela Merkel still visits Toulouse, but with new French President Nicholas Sarcozy. The post has been retained as a useful historical context to more recent developments in the company.

[Original Post follows ...]

You know an international company is in trouble when it becomes the topic of discussion between corporate and political leaders. Today, German Chancellor Angela Merkel and French President Jacques Chirac meet with executives of EADS in Germany. The subject on the agenda employment, and potential job losses at the planemaker Airbus. The company’s largest sites, with greatest potential for job losses are at Toulouse and Hamburg.

Last year, A380 project executives, including Airbus CEO Gustav Humbert, were dismissed. Humbert was blamed for the failure to deal effectively with the project delays, but also was accused of concealing the seriousness of the problems.

In the same period, it was revealed that the joint CEO of EADS, Noel Forgeard had sold EADS stock weeks before its Airbus subsidiary announced the Airbus A380 would be delayed again. M. Forgeard resigned, and the stock plummeted.

In a short space of time, Humbert’s replacement, at Airbus, Christian Streiff resigned, which was when Louis Gallois stepped in. Streiff was believed to have failed to secure backing for a financial package he believed necessary to turn things around with the A380. Gallois is a much admired leader with a track record of top-level negotiating skills as well as industry experience. This week, the famed negotiating skills of Louis Gallois have been strained. An announcement of the restructuring with losses of over 10,0000 jobs was postponed, and now will follow the meeting of EADS executives with Merkel and Chirac.

The Killer facts

The killer facts that will pervade the talks are as follows. The mighty and innovative airbus 380 project has been mired in technological challenges (particularly over gigantic wiring problems) at the Toulouse plant. At minimum, these will cause huge compensation payouts to customers. (The financials would be much worse if competitor Boeing were not working to full capacity). The governance of EADS has been an extended story of struggle between French and German interests (in which the Franco-German co-leadership plays a part). British political influence disappeared after UK defense and aviation company BAE Systems announced its plans to sell 20% stake in Airbus to EADS last year.

What will happen next?

Don’t expect to find a neat Business School solution on the strategic issues. The dreaded PEST analysis (Political, Economic, Social and technological factors) seems more relevant than simple SWOTting (analysis of corporate strengths and weaknesses, against external threats and opportunities).

Structural production factors dictate that the pain of job losses will be spread around with greatest potential losers in Germany, France, and England. Interestingly, the share price has had its medium term downward adjustment, and has been remarkably stable over the last six months of corporate turbulence.

There seems scope for some wriggle-room, and political / economic trade-offs. Louis Gallois may yet lead by facilitating some creative (win-win) decisions of national involvement in future business streams. We will soon find out who will be doing the most wriggling, and where.

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12 Responses to Airbus struggles: A killer fact analysis

  1. [...] I recently suggested that Airbus was struggling in its efforts to secure its future because of some killer facts noting that: The killer facts that will pervade the talks are as follows. The mighty and innovative [...]

  2. Mira says:

    Nice post.

    Just wanted to share article PEST Analysis In Detail with you.

    Thanks

  3. Airhostess says:

    Airbus needs to market itself more aggressively, boeing is taking away its business, we in India are seeing it, with a robust aviation sector, all the orders for new aircrafts are going to Boeing

  4. Tudor says:

    Hello and thanks for the conribution. I have experienced the transformation in India’s aviation business. I used to make the (then) Bombay to (then) Baroda trips from time to time.

    My impression is that marketing is not the major problem with the new products at Airbus, and business is being lost through uncertanties of delivery times, Fortunately for Airbus, even Boeing can’t promise to meet the demands of the market, and the two companies have no immediate serious competitor.

    Best wishes

    Tudor

  5. Mr. Clayton says:

    Clayton Corporation ,based out of Pittsburgh, PA US, is gearing up to handle all the concerning aspects of production needs to infrastructure here in the North America. Airbus has no accountability in the areas of their numerous supply chains. Configured with electrical engineering data loss on their massive wiring networks. Airbus will be issued a comprehensive business proposal that will address the current problems. The business proposal will be a “turnkey” solution. I have a similar agreement with their parent company DaimlerChrysler AG already in place.

    Media contact info: ceo@advancedengineeringsolutions.net

  6. [...] the start of the year I attempted to tease out the killer facts in the Airbus affair. At the time, it seemed that [In 2006] A380 project executives, including [...]

  7. vk christy says:

    To provide the effective corporate governance and strategy as it faces so many internal and external changes. The shareholders and the management team should modify the organisation current environment and management including leadership structure to improve the efficiency, cohesiveness. EADS management and leadership structure should adopt governance best practice to balance between French and German share holders; as well the German government has been consulted. To maintain cooperation between two companies between the organisation of France and Germany are two main national interests. Delay in production difficulties in France due to job preservation priorities of German and French polititicians. The innovation of the technological challenges for airbus A380 is not advance as Boeing as related to issues.

  8. Tudor says:

    I find your proposal quite persuasive. My concern is ‘how to bring it about?’.

    It does seem that chances at EADS/Airbus since the original post was written are moving tfings in the right direction.

    You can find quite a few more recent posts in Leaders we deserve by searching for ‘Airbus’.

    Thanks for your contribution

  9. [...] EADS strategic issues under Louis Gallois and also its leadership challenges have been covered. [...]

  10. Simao says:

    Hey guys, I am doing an assigment for Systems and operations Management on the company Airbus, but can’t seem to find anything about it. You guys know where to look? Thank you,

  11. Tudor says:

    Lots of Airbus stuff in the corporate case world. Remember to search for EADS too.

    English version of Der Spiegel has run some nice interview/analysis pieces.

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