A is for Albatross as Airbus struggles with the A400 project

April 18, 2009
Airbus A400 EADS mock up

Airbus A400 EADS mock up

Der Spiegel continues to be the window into the complex world of EADS and its giant subsidiary Airbus. In a major interview with Airbus CEO Thomas Enders, Der Spiegel throws light on the corporate challenges facing the organization and its leadership.

The double whammy

Der Spiegel was in particularly robust mood in its interview with Thomas Enders recently [March 2009]. The two-part report opened with a series of fierce questions challenging the company’s long-term viability. Ender’s truculence comes through, even in translation and from the printed page. The second part of the interview concentrated on a single project, the A400M and that made the story appear all the more damaging

Technological innovation is notoriously risky, and there must surely be additional risk factors emerging as a consequence of the financial turbulence of the last year. The A400M is becoming known as its albatross. The plane, still yet to fly, is a military transport plane promising payload deliveries over extended distances under extreme conditions. Delays and production mishaps have plagued the project (even in comparison with the more publicised woes of the company’s other high-technology efforts).

Der Speigel as rotweiler

Der Speigel runs excellent and probing articles. One can’t help admire its success in its interviews with Germany’s business leaders. [In style it reminds me of the aggressiveness of England’s Newsnight programme and its chief Rotweiler Jeremy Paxman]. In the issue carrying the Thomas Enders interview, there were similarly tough questions asked of Robin Goudsblom, a Lidl senior manager, over the company’s personnel scandal;and of Nikolaus von Bomhard, CEO of reinsurance giant Munich Re, over banker bonuses.

Enders comes clean

Under fire, Thomas Enders is remarkably direct. He was first reminded of a recent wager.

SPIEGEL: Mr. Enders, on December 31 you won a bottle of champagne. You had wagered that Airbus would manage to complete 12 of your super-jumbo jets by the end of the year. That bottle could cost your company millions because, in the heat of the race against the clock, quality and safety may have fallen by the wayside.
Thomas Enders: No, we haven’t made any compromises here. Our customers are generally very satisfied with the A380. But, as you know, it is an extremely complex aircraft, which now unfortunately — like every new model during the introduction phase, I might add — has some teething problems here and there

Then he faced equally direct questioning on a range of general topics such as Government subsidies. These did not result in subsequent wider headlines, perhaps because they were ‘nothing new’ either in question or reply.

Part two of the report gave a focus to the entire interview in the plight of the A400M. The level of openness from Enders deserves attention from students of leadership:

SPIEGEL: Your biggest worry is currently the planned A400M military transport aircraft, which has been in the news for months. Which countries could cancel as buyers in the future?

[Enders denied the specific charge of cancellations and accepted accusation that the company had to shoulder some blame]

Enders: EADS should never have signed this contract. Our American competitors would never have accepted such conditions. We’ve made big mistakes, and errors have also been made on the customer side. We should now rectify these together.

Enders went on to deal frankly with equally tough questions on ‘[r]ivalries and power struggles between the Germans and the French’, consolidation of the European headquarters in Toulouse ['maybe a good idea'], and the loss of a major American military contract.

Leadership notes

I was struck by the tone of the interview and by the fascinating technical insights provided into corporate and production management.

How important is the interview to EADS? This is one of the questions open to reflection and debate. I suggest that Der Spiegel is a media leader in news of the Airbus adventures from a European perspective. Its interviews are guaranteed widespread subsequent coverage. A typical example is the report in Aerospace [30 March 2009]. Even The Economist draws on the Spiegel interview, although its piece shows evidence of its own deeper research [bonus points to the Economist for that].

The interview has to be taken seriously by the company leadership. A faulty performance (and it is a performance) would become part of a subsequent narrative developed in the media.

How well did Enders do? You could assess the interview for strengths and weaknesses. A misguided remark might become a hostage to fortune for the company in the future. On the other hand, the impact is mediated by several communities deeply concerned with the future of the company and whose judgments go to make up the ’conventional wisdom of the dominant elite’ . Enders has the responsibility to defend his position without being too defensive, and avoid easy-to-refute claims. Which in this case involved a painful level of openness. If he appeared a bit testy at times, that might be a permissible weakness rather than a fatal one.

Despite tough times, the corporate leadership of EADS seems to have stabilized under the urbane Louis Gallois, and his Airbus CEO, the former paratrooper Thomas Ender.

To go more deeply

We have followed this story in earlier posts. The Economist article on Airbus can be found in its April 11th -17th, 2009 issue.


Thomas Enders Parachutes into Airbus Leadership

November 23, 2007

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Former Paratrooper Thomas Enders has hit the floor running as leader of Airbus. His new boss at EADS, Louis Gallois, may be happy to leave the German in the limelight

In the wake of recent restructuring at EADS, Thomas Enders, former co-CEO, took on an apparently lesser job as operational chief of the major manufacturing operation of Airbus. The other former co-CEO was Louis Gallois, who assumed sole leadership at EADS.

In a speech to workers at Hamburg [Thursday November 22nd 2007] Enders returned to a familiar theme, the vulnerability of the European company to the continued weakness of the American dollar.

The BBC has been presenting the story as Airbus fearing ‘weak-dollar death’

“The dollar’s rapid decline is life-threatening for Airbus [and]has gone beyond the pain barrier”

Airbus is already shedding about 10,000 jobs and selling plants as part of its Power8 restructuring plan after delays to its A380 superjumbo drove the planemaker into a loss last year. The dollar has hit new record lows against the euro this week.

Enders has taking a higher profile since taking over a new role as head of Airbus. The new structure has less of a feeling of realpolitik about it, even if the whole company had suffered for years through the tensions of Franco-German co-ownership, with minor additional support-roles from the Governments of Spain and the United Kingdom.

Background

Two stories have repeatedly surfaced in press reports. The one story examines possible malpractices within the company. The other is the competitive struggles with arch-rival Boeing for global dominance in civilian and military aircraft markets. We have followed the ebb and flow of events in earlier posts.

The situation has been brilliantly updated by the Speigel team of Dinah Deckstein and Armin Mahler in an extended interview with Enders at Airbus Headquarters in Toulouse, France.

SPIEGEL: Mr. Enders, you are the fifth CEO of Airbus in the space of only two years. As a former paratrooper, how does it feel being in the ejection seat?
Enders: When you’re going into a difficult mission as a paratrooper, you know that success is not guaranteed. The same applies in my job. As the former co-CEO of parent company EADS, I don’t exactly see Airbus as unknown terrain. In other words, I knew what to expect.

Pulling no punches, the journalists probe the potential financial irregularities, the company’s restructuring plans and production difficulties, and the possible difficulties of the relationships between Enders and Gallois. Some of the questioning produced the routine company line. The on-going enquiry was brushed aside. But some answers were more revealing. Enders spoke frankly of the political difficulties that had plagued EADS, and Airbus specifically. This was also indicated in the tardy response of production difficulties of the mighty A380. He also confronted the problems of under-investment for innovation in competitive technology, warning that the decline in the dollar plases the company in an increasingly tough situation.

SPIEGEL: The delivery of the first A380 on Monday of this week marks the preliminary end of an almost two-year cliffhanger. To complete the jet on time, employees had to be transferred to the Toulouse assembly plant from all across Europe. How much longer to you plan to produce the jet using this costly individualized approach?
Enders: The first wave of 25 planes, including the five test aircraft, will in fact be produced in what is essentially manual labor. For the second wave, a modern, harmonized IT system will be used which does, in fact, make industrial series production possible.
SPIEGEL: Your other big problem is the A350, the model that’s competing with the 787. It had to be completely revised, in response to pressure from customers. How could this happen?
Enders: It’s very simple: We had underestimated Boeing. We hope that will never happen to us again.
SPIEGEL: … Boeing seems to be playing with a better hand. Many of your plants lack the know-how to produce the new plastic fuselages in sufficient quantities and at the necessary level of quality.
Enders: Nonsense! Our plants in Stade, Nantes and Illescas in Spain have long been in command of this technology and are not in any way inferior to Boeing in this regard. But we cannot come up with the needed investment money to convert all Airbus operations to carbon fiber production. That’s why we plan to sell some of our plants to new owners.

SPIEGEL: Is there growing political pressure to award the contract to the last remaining domestic contender?
Enders: Of course, when you are dealing with national politicians there are preferences for national solutions. This is no different in Germany than in France or Great Britain. But you won’t be seeing a feel-good or cozy compromise designed to satisfy political interests, which could leave us with some big problems in the medium term.

The Gallois Enders game

Reading between the lines, Enders appears as a non-nonsense leader, more likely to demonstrate toughness, where Louis Gallois would instinctively display a more conciliatory style. This makes the German’s activities in Toulouse all the more interesting to follow. Gallois will be as comfortable out of the limelight, as Enders is in it.

SPIEGEL: Do you confront the employees with uncomfortable truths, if need be?
Enders: I happen to be someone who doesn’t beat about the bush. I like to get to the point. You will not see me changing my style now and tiptoeing around. The important issue is that people realize that I am a hands-on manager — not someone who’s interested in politics, but someone who has the company’s interests at heart

The tough and tender combination of Enders and Gallois may yet turn out to be a formidable team at EADS.

To go more deeply

As well as the informative text, Spiegel has some superb graphics.

Our earlier posts can be followed through the Airbus categories. These include The financial investigation called by Nicholas Sarcozy, and also

the corporate restructuring.


Sarcozy accepts need for EADS probe

October 12, 2007

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The long-running tale of malpractice enveloping EADS continues. Nicholas Sarcozy distances himself from any involvement, and calls for punishment of the guilty

Earlier posts to this blog have followed the various dismissals, resignations, restructurings, and political interventions, at EADS and its Airbus subsidiary.

This week the International Herald Tribune picked up the news agency bulletin:

“If there are people who committed fraud at EADS, judicial officials must get to the bottom of it so that we know the truth and those who behaved dishonestly be punished in proportion to what they did,” Sarkozy said. “I’ll get to the bottom of the investigation to know what the responsibilities of the state were at the time.”

While a major shareholder, the French government does not sit on the EADS board. Its interests are represented by the French defense and media conglomerate Lagardere, which holds a 7.5 percent stake.

EADS shareholders Lagardere SCA of France and Germany’s DaimlerChrysler AG announced in March 2006 that they would reduce their stakes.

There are several inter-related strands to this story. Airbus is a European flagship company with a complex governance structure through its parent EADS which involves particularly French and German Governments. The business theme is centred around the fierce competition between Airbus and Boeing products. The political theme involves unresolved bickering about the ways in which the US and European governments subsidize their commercial interests. There are additional fascinating manufacturing, logistic, and technological issues to do with creating next-generation products across multiple international sites, and meet increasingly drifting deadlines. Oh, yes, and Airbus is struggling to achieve considerable cost-cuttings with industrial relations troubles. Add to all these issues a series of allegations of corruption.

At 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 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.

In a few months, the company had begun to unravel some of its knottier problems, and achieved a more convincing organizational structure.

However, the changes left some players with lesser roles.

Arnaud Lagardère (of the media group of the same name) was French Co-chairman of EADS and seems to have been airbrushed out of the wider game. It had been muttered (especially in the French press) that he escaped scrutiny over earlier share scandals, and is ‘protected’ by Sarcozy, who was given a rather soft ride from Lagardère’s media group in his election campaign. M. Largardère, claims that he had no inside knowledge of delays in deliveries of the A380, when his family group sold off 7.5 per cent of the Franco-German planemaker’s shares in April 2006. The possibility remains that he will be in line to return to EADS in the future, when the Chair rotates from German to French hands

According to The Independent, reports from the French press, that

[S]ince taking over the family empire after his father died in March 2003, M. Lagardère has cultivated a chatty and approachable style. He has, however, been plunged into controversies. His group is one of France’s biggest media players, owning a controlling stake in Hachette-Filipacci Media, the company that owns Paris-Match. He also has smaller stakes in Le Monde, Le Parisien and L’Equipe … M. Lagardère has been accused of interfering in editorial decisions to protect his friend M. Sarkozy and especially to prevent discussion of alleged problems in the President’s [private life]. Le Monde quoted a “close adviser” of M. Lagardère [as saying that] “whatever happens” he will be protected by M. Sarkozy.

It now seems, that “whatever happens” M. Sarcozy intends to place himself hors de combat.


BA backs the Bus and the Dreamliner

September 29, 2007

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British Airways splits its future plane purchases between Boeing and Airbus. Although earlier statements suggested that the company was not interested in a Superjumbo sized carrier such as the new generation A380, Willie Walsh and his team show a chess-like grasp of strategy

Speculation in Seattle was pretty much right. A week before any official announcement, Industry insider James Wallace noted

The campaign is a key showdown between the A380 and 747-8 Intercontinental and the 787 and A350 . So far, only Lufthansa has ordered the passenger version of the 747-8. But Airbus also needs another major international customer to back the A380. It has repeat orders from Lufthansa and Singapore Airlines, but Airbus has long sought to bring BA into the A380 fold.

Jefferies & Co. analyst Howard Rubel told the AP he believes investors are expecting British Airways to split its order between the two aerospace rivals.
“I think B.A. wants to bring a little competition into the mix,” he said.
BA Chief Executive Willie Walsh has visited Boeing and Airbus for briefings on their planes.
The airline recently ordered more 777s.
Even though British Airways early on said the A380 was too big for its needs, Walsh has said the airline is now interested in the big Airbus jet, which will enter airline service next month with Singapore Airlines after a two-year delay.

Wallace’s blog also attracted a remarkable set of speculations about the prospective decision. Most seemed to be based on ‘sources close to Boeing or BA’. The following was typical

Posted by unregistered user at 9/20/07 9:21 a.m.
I’ve heard 10 A380′s + options on 10 more , 20 787′s + 10 options and 10 A350′s + 10 options

When the news of the decision was formally announced it was widely replicated from news agency sources. I took this from The BBC, but found it on all the main news feeds.

BA will buy 12 Airbus A380 superjumbos and 24 Boeing 787s, to be delivered between 2010 and 2014, for a reported $8.2bn (£4.1bn). The group also has options to buy seven more A380s as well as a further 18 Dreamliners from Boeing.
Further negotiations will occur so that BA can replace its remaining 747-400s. This appears to be between the 787-10 and the 777-300 ER from Boeing, and the Airbus A350

The Boeing reaction was between gritted teeth:

The Boeing Company [NYSE: BA] is honored that British Airways has selected the 787 Dreamliner as a key element of its long-haul fleet renewal

What’s going on?

Leadership geeks may be tempted to see unfolding a story of strategic leadership. If so, it is a story which has to place leadership with a wide cast of strategic players. We may start by thinking of Willie Walsh as the dominant decision-maker in the story, with some billion pounds/dollars to invest in the future of his company.

The evidence of Mr Walsh’s leadership style suggests that he will have been very active in the processes building up to the decision, internal to British Airways. At present we can only speculate. However, the decision has enormous significance. It will impact on the travelling lives of millions of people some more directly than others. Arguably it will impact on the future of employees of Boeing, EADS, and a myriad of suppliers and sub-contractors including Rolls Royce who will supply the engines. At another level, the debate on political influence and subsidies to Airbus and Boeing continues to bubble away.

However charismatic and autocratic his leadership style, Walsh will have been flying in tricky conditions and with a chief pilot’s usual near-overload of advice and chatter. Advisors, and advisors of advisors will have examined assorted risk assessments from in and outside BA into which data will have been fed from numerous sources. Somewhere in these the influence of various governments and global institutions will have been factored in, as well as the much-publicised production delays at Airbus and more recently at Boeing for the A380 and B787 projects. Willie Walsh keeps sane by following what the great Herbert Simon called satisficing, or simplifying the decision through a set of personal mental filters.

In an avalanche of articles and books since the 1950s, Simon ..focused much of his attention on the issue of decision-making – and [developed his theory of ] “bounded rationality”. Agents, he claims, face uncertainty about the future and costs in acquiring information in the present. Thus .. they have only “bounded rationality” and are forced to make decisions not by “maximization” by “satisficing”, i.e. setting an aspiration level which, if achieved, they will be happy enough with, and if they don’t, try to change either their aspiration level or their decision.

I have taken the view that such processes are those which chess-players also have to make. In this chess-game, BA wants to avoid fixing the position, when there is much to be said for keeping options open. So the overall decision on replacing the fleet of aging 747 400s may or may not have been made. It makes sense to keep options open, even to the extent of splitting up the decision between the two giant contenders for the business. That is partly why decisions also involve options as well as firm commitments.

Those with a liking for logistics theory can debate the merits of smaller planes and P2P (point to point) strategy, and larger ones with a Hub-based strategy. Whatever.

A judicious mix of planes of differing size keeps both strategic options open. A judicious mix of ‘top-down’ leadership actions, and ‘data driven’ analysis may also be appropriate.


The positions change on the EADS chess board

July 16, 2007

A major restructuring is announced at EADS, the parent of the high-profile Airbus organization. The complex double helix of German and French bonds has been split apart. The reconsituted entity is a more recognizable structure. Will it provide for more effective corporate governance and strategy, as it faces severe internal and external challenges?

The announcement on the EADS website was calm, hardly signifying any major changes. It all read as if everything was well-planned.

EADS shareholders have decided – together with the EADS management team – to modify the company’s current management and leadership structure. Guiding principles of the modification are efficiency, cohesiveness and simplification of EADS management and leadership structure, towards governance best practices and in the respect of balance between the French and the German shareholders. The German Government has been consulted as well.

Under the simplified management structure, EADS will be led by a single Chairman and a single CEO.

Rüdiger Grube will assume the position of sole Chairman of the Board of Directors of EADS. In this role, he will be responsible for overseeing the Group’s strategic development and dealings with its Shareholders. In particular, he will chair the newly created EADS strategic committee.

Louis Gallois will assume the position of sole CEO of EADS. In this role, he will be responsible for leading the management team in the execution of the Group’s strategy and managing the company’s interaction with public shareholders.

Thomas Enders will assume the position of CEO of Airbus in the Toulouse headquarters of the company, reporting to the CEO of EADS. He will be supported by Fabrice Brégier as COO of Airbus.

According to the BBC,

The French joint chief executive Louis Gallois will take sole charge at EADS while his German co-head Tom Enders gets the top job at Airbus.

EADS’ complex structure has been blamed for many of its recent problems.

“We need to be a normal company,” Mr Enders said.

Previously, EADS had two chairmen and two chief executives: one French and one German. Daimler executive Ruediger Grube will become sole chairman of EADS, a post he previously held jointly with France’s Arnaud Lagardere.

The implied abnormality by Enders was the double-harnesses imposed on EADS by the influences exerted by two co-chairman, and two co-CEOs This was the heritage of the company’s formation, and reflected the ‘least worse’ way of maintaining cooperation between the company’s two main national interests in France and Germany. No alternative better could be found than the structure which permitted one French and one German chairman, one French and one German CEO on the main board.

But let’s see what can be concluded beyond the formal statement:

One or two commentators suggested that the changes were not particularly unexpected. I will be charitable and suggest that those commentators must have been holding back on the outcome for some reason or other. The details are far from expected.

In ealier posts I had chronicled the various problems at EADS and its the troubles that have piled up for its major subsidiary, Airbus. The recent press reports had led me to conclude that attempts to resolve the complicated dual-management structure appear to be centering on co-chief executive Tom Enders.

Mr Enders is a controversial figure in France after he publicly criticized political interference from Paris and suggested the possibility of sensitive asset disposals. However, Daimler, the core German industrial shareholder in EADS, is determined that Mr Enders should not be sacrificed in any final deal.

Let me put a few pieces on the chessboard. Louis Gallois, head of Airbus, is widely admired, and believed to be needed to stick it at Airbus, and see though Power 8, the strategic plan to streamline the business. This is a production and commercial imperative. He is co-CEO of EADS with Tom Enders at present.

Arnaud Lagardère of the media group of the same name is French Co-chairman of EADS. His German co-chair is Rudiger Grube.

Nicholas Sarcozy and Angela Merkel are also in play, with special concerns for their national interests (and for their own political positions). EADS Shareholder DaimlerChrysler has signaled willingness to increase its holding, a positive gesture to Sarcozy who would like to reduce the holding of the French Government. DaimlerChryser’s bid is linked to their interests in keeping Tom Enders in play.

The rumors in the French press

Rumors suggest the game will involve taking Enders off the board. This has been denied emphatically by the company.

So what is ‘behind the headlines?

The company statement seems to have airbrushed out Arnaud Lagardere, the earstwhile Co-chair of EADS. Strange. So the German Rudi Grube takes over as Chair of the EADS main board. But Lagardere remains a powerful figure and shareholder. It has been suggested that he has escaped scrutiny over earlier share scandals, and is ‘protected by Sacozy, who in turn is aware of a rather soft-ride from M Lagardere in his recent election campaign. And there is the possibility that the media figure will be in line to return as sole Chair of EADS in the future, in an agreement in which the Chair will rotate from German to French holders every five years.

Another ‘solution’ left Louis Gallois as CEO of EADS and Tom Enders in charge of the subsidiary Airbus. This grants Gallois his (alleged) wish to avoid being left to sort out Airbus while answering to Tom Enders. On the other hand, the one figure widely regarded as key to implementing the Power8 plan at Airbus is Gallois, now expected to play a more political role.

The changes are sufficiently complex to warrant a working party investigating them.


Boeing, theater of dreams and Airbus nightmare

July 8, 2007

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Boeing launches its much-awaited Dreamliner 787. For Airbus is must seem more like a nightmare. In this fantasy battle, their champion, the Airbus 380, appears to be as potent as Superman in Kryptonite underpants. Can the European aero-dream still turn out all right in the end?

In Seattle they build planes. And, at the moment they are also very much in the Hollywood territory of selling dreams. The fantasy object is the new Dreamliner. High-tech, high-flying, the i-phone of the skies, the flying apple of the mind’s eye.

Meanwhile, some six thousand miles to the East (well within the 8000 mile range of the Dreamliner), Airbus executives put a brave face on for the ceremonies.

The power of the dream

Who can doubt the power of the dream? Who knows what happens if we stop believing, as James Barrie reminds us in Peter Pan, and Terry Pratchett points out in The Hogfather.

The selling of the dream has been a signal success, with press release claims that the 787 is already the fastest-selling commercial airplane in history with over 600 orders valued at more $100 billion at current list prices.

Even those us immune to the romance of the tale know that the 787 is the next giant leap of a line of aircraft of great consequence in the history of civil aviation. The 707 was a first. The 747, affectionately known as the first Jumbo jet. Now the 787, the star in the theater of aero-dreams.

Airbus versus Boeing

From the American side of the Atlantic the battle is a no-contest. Here’s the view of Lance Winslow, a not totally unbiased correspondent assessing the Dreamliner against its most direct competitor the Airbus A-350

Is the A350 really that spectacular? Hard to say, but one thing is for certain it is certainly no match for the robust, daring and dashing Dreamliner of today. Airbus’s attempt to compete with the Free Market Boeing Company has once again earned itself a distant second place or last place in the battle for the sky. The A-350 will use the same fuselage as the A330, but the wings will be made of composite. This is hardly a reciprocal response to Boeing’s cutting edge technology and advancements in design. But we have come to expect mediocrity from Airbus. When flying do you really want to ride in a bus while traveling at 30,000 feet in the Air? Think about it.

The Free-Market Boeing versus EU-subsidized EADS is important issue which will continue to be brought into the debate. The article also gets to another the key factors in the argument, the technical merits of the competing products.

Meanwhile in Europe …

In Europe, the financial press is more preoccupied with the boardroom battles within EADS, the corporate parent of Airbus. The Financial Times suggests that the efforts to restructure its complicated dual-management structure appear to be centering on co-chief executive Tom Enders.

Mr Enders is a controversial figure in France after he publicly criticized political interference from Paris and suggested the possibility of sensitive asset disposals. However, Daimler, the core German industrial shareholder in EADS, is determined that Mr Enders should not be sacrificed in any final deal.

We will continue to follow the twists and turns of this board-room battle. My point here is that persistent stories of corporate infighting may be indicating that the overall position is highly unsatisfactory. Boeing, we may presume, is doing very nicely. So nicely, that there are few rumors of boardroom clashes. In contrast, EADS leadership is forced to attend to the battles over its international border disputes.

The Chequer Board

What if anything can EADS, and more specifically the larger part of the outfit which is Airbus, do to break out of its nightmare? Incidentally, a deadline is approaching (July 16th) which dragged the New French President into the battle.

Let me put a few pieces on the chessboard. Louis Gallois, head of Airbus, is widely admired, and believed to be needed to stick it at Airbus, and see though Power 8, the strategic plan to streamline the business. This is a production and commercial imperative. He is co-CEO of EADS with Tom Enders at present.

Arnaud Lagardère of the media group of the same name is French Co-chairman of EADS . His German co-chair is Rudiger Grube.

Nicholas Sarcozy and Angela Merkel are also in play, with special concerns for their national interests (and for their own political positions). EADS Shareholder DaimlerChrysler has signaled willingness to increase its holding, a positive gesture to Sarcozy who would like to reduce the holding of the French Government. DaimlerChryser’s bid is linked to their interests in keeping Tom Enders in play.

The rumors in the French press

Rumors suggest the game will involve taking Enders off the board. This has been denied emphatically by the company.

The current form of the EADS/Airbus nightmare will be shared more widely in Toulouse after this month’s summit meeting.


The Postal Strike and the Horsemen of the Economic Apocalypse

June 29, 2007

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The twenty-four hour postal strike in the UK is the type of ‘little local difficulty’ large enough to require an immediate response from a new political leader. Even with his formidable energy, Gordon Brown could do without confronting an industrial dispute so soon into his leadership. There are echoes of the Airbus conflicts that captured the attention of Nicholas Sarcozy in the first week of his Presidency.

Why strike? Why now?

The strike, which began at 3 am on Friday June 29th 2007, involved some 130,000 members of the Communication Workers Union who have issued the following statement

The CWU’s Negotiating Team met with the Royal Mail’s Chief Executive Adam Crozier, and his Senior Management Team yesterday. The CWU reiterated to Royal Mail that it was prepared to reach an agreement that would move forward both the Union and Royal Mail’s position … The CWU impressed upon the company that there was no possibility of Royal Mail management successfully transforming the business unless both parties could reach an agreement that galvanises the workforce too. During the course of the meeting the Union set out its position and expressed its genuine concern about Royal Mail’s business plan and how it would result in a spiral of decline for the company, and the workforce … The CWU reminded Royal Mail that the Union was not alone in severely criticising Royal Mail’s business plan. A recent all-party Select Committee criticised Royal Mail’s leadership for lacking vision.

Chief Executive Adam Crozier, responded by rehashing all of his previous statements and refused to enter into meaningful negotiations with the Union.

The strike on Friday 29th June 2007, will go ahead.

Technology and jobs

The old debate about technology and jobs continues. Innovation accompanies creative destruction, like Horsemen of the Economic Apocalypse. Maybe ultimately the job losses are compensated elsewhere. Which is no consolation to threatened workers. The perceived grievances of Royal Mail workers are easy to identify. As with Airbus, competitive pressures have triggered plans to reduce costs which threaten jobs.

The Royal Mail leadership team

Royal Mail has a high profile leadership team within the UK business world. Chairman Allan Leighton has been persistently linked with stories of his intention to head a lucrative buy-out initiative. In an earlier post I noted:

Allan Leighton has an appetite for self-publicity, as inspection of the Royal Mail website reveals. He presents himself as a dynamic (and somewhat terrifying) leader. In public he attempts to soften the image by implying he is very much one of a team, operating closely with CEO Adam Crozier.

Their styles remind me of an earlier high-profile double act, Lord King and Colin Marshall at British Airways. The pugnacious King had also been confronted with an ailing BA facing vigorous competition. Like Leighton, King presided over job cuts on a similar scale, and had serious internal morale issues and Union conflicts. Colin Marshall, like Adam Crozier, had a more urbane style.

Since his arrival, the Royal Mail has cut 30,000 jobs, shut thousands of post offices, and moved away from record annual losses that had reached £1bn. The various changes have been forced through against considerable opposition internally and externally.

The changes have not resolved the fundamental problems of the corporation which remains in dire financial circumstances. It recently announced that the gap in its pension funds would be tackled by ending the corporation’s final wage pension scheme, another unwelcome move and one described as unilateral bullying by its Union leaders.

Amazon and The Economist on-line

In preparing this post, I held off from ordering a book from that well-known e-business Amazon. It could wait. Co-incidentally, Amazon could not wait for a better deal from The Royal Mail, and has recently switched a lucrative contract away. If the management’s resolve needed stiffening, that would have done the trick.

Yesterday, those nice people from The Economist sent me an email. It apologized for any inconvenience caused by today’s postal strike, pointing out that I am eligible as a subscriber to access their on-line version, if I can’t wait for the delayed delivery through the Royal Mail.

Globalization as economic apocalypse

Royal Mail employees, like the rest of us, are facing an economic apocalypse. The current wisdom of the tribe is that we are seeing consequences of globalization. My examples illustrate some of the threats and opportunities cropping up, as the horsemen of the apocalypse gallop about, and technological changes sweep the countryside.

Card-carrying optimists hold to the view that the human spirit, creativity and morally-grounded leadership will help us through the crisis.


Sarcozy, EADS. Qu’ est-ce qu’il a les demaneaisons?

June 1, 2007

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Nicholas Sacozy may be finding that EADS and its Airbus operations are giving him a most irritating itch that refuses to go away. One of his first acts as President was to visit the Toulouse sight of Airbus. Now the earlier governance problems at EADS may be returning to chafe him, with suggestions of his own peripheral involvement.

Background

Last year, A380 project executives, including Airbus CEO Gustav Humbert, were dismissed, primarily for failure to deal effectively with the project delays. Humbert was also was accused of concealing the seriousness of the problems. In a short space of time, Humbert’s replacement, Christian Streiff resigned, and the current leader, Louis Gallois was brought in. Streiff was believed to have failed to secure backing for a financial package (The Power8 plan) he believed necessary to turn things around with the A380.

The Airbus Power8 announcement

The Airbus Power8 announcement of 28th of February indicated:

A third A320 Family FAL [Final Assembly Line] will be set up in Hamburg immediately to cope with the steep production ramp-up currently under way. This FAL will be established in already existing facilities and will have full type flexibility when demand for A320s exceeds rate 14 per month. The A320 will continue to be assembled in Toulouse up to 14 [per month]. Hamburg will also perform final assembly of the future New Single Aisle family.. Furthermore, in order to allow parts to be fitted in the most logical place to optimize the overall cycle time, some upstream preparatory A320 and A380 cabin installation work will be transferred from Hamburg to Toulouse.

Which did not prevent vigorous opposition to the plan at Toulouse, and an early problem for Nicholas Sarcozy’s Presidency.

The itch that won’t go away

Within weeks of his election, Sarco was at Toulouse. He bought some time, obtaining some wriggle room by promising to return in July with Angela Merkel, thus indicating the international dimension of the problem. But the earlier itch remains.

The French co-chairman of EADS, and known to be close to M Sarcozy has been questioned by financial investigators still exploring into alleged insider trading in EADS last year. M. Largardère, claims that he had no inside knowledge of delays in deliveries of the A380, when his family group sold off 7.5 per cent of the Franco-German planemaker’s shares in April 2006.

According to The Independent, reports from the French press, that

[S]ince taking over the family empire after his father died in March 2003, M. Lagardère has cultivated a chatty and approachable style. He has, however, been plunged into controversies. His group is one of France’s biggest media players, owning a controlling stake in Hachette-Filipacci Media, the company that owns Paris-Match. He also has smaller stakes in Le Monde, Le Parisien and L’Equipe … M. Lagardère has been accused of interfering in editorial decisions to protect his friend M. Sarkozy and especially to prevent discussion of alleged problems in the President’s [private life]. Le Monde quoted a “close adviser” of M. Lagardère yesterday as saying that “whatever happens” he will be protected by M. Sarkozy.

I took this to mean that his friend would continue to conform to the French distaste for airing the personal problems of politicians. Nevertheless, in England, The Independent’s article may be taken for evidence of a political cover-up.

The EADS itch will not be going away for the new President.


Nurses pay won’t go away. Gordon Brown must have his say

May 28, 2007

_42810465_noreena203.jpgA recommended pay award for nurses in England was partly delayed by the Government. The Royal College of Nursing is to ballot its members for possible industrial action. Politicans back the call. A tricky and possibly important early challenge for Gordon Brown’s leadership. Is there anything he might learn from Nicholas Sarcozy’s first weeks in office?

How long is a leader’s honeymoon period? As long as a piece of string. Gordon Brown has over a month to go even before the nuptuals are celebrated. Already there are malcontents likely to be at the wedding ceremony.

Gordon Brown as Prime Minister will be not be given as much time to find his feet as was David Cameron on his appointment of leader of the Conservative party and wannabe Premier. Brown’s honeymoon will be briefer, if only because he has been in the public eye as a political heavyweight for a more that a decade (and a decade as we all know is a very long time in politics).

In this respect he has something common with Nicholas Sarcozy, the newly elected French president. Sarco had a tricky little test within days of coming to office. As he was preparing to assume the trappings of power he had a little time to consider the rumbling discontent of workers at Airbus.

Now Airbus in the French psyche is not quite the cultural icon as is The National Health Service in the British. Not quite. But combine the threat the French jobs with the traditional willigness for action direct and you are looking at a challenge that had to be dealt with at risk of a bad first impression as a leader. So we might conclude that Gordon has this also in common with the French leader.

The joys of opposition

The circumstances provide one of the joys of opposition. The opportunity to espouse a popular cause. Already there is further support from activists who have enlisted Professional Footballers to the cause.

Gordon Brown in opposition would have been in there with his political opponents (which, as they say, can be found in, as well as outside, his own Party).

According to The BBC

Nearly 200 MPs, including the leaders of both main opposition parties, have backed calls for nurses to get a full 2.5% pay increase this year. Nurses in England, Wales and Northern Ireland have been offered a 1.5% rise followed by another 1% in November .. [The MPs also include] several leading Labour figures – the deputy leadership candidate Jon Cruddas, former health secretary Frank Dobson and former ministers Kate Hoey and Stephen Byers

What might Gordon do?

There is a juicy dilemma of leadership here. Gordon as social reformer would like to find a way of supporting the Nurses. As politican he would also like to win some points for being nice to such a cherished group of workers. As Chancellor, he has already faced the tough financial and political consequences of granting a modest-looking pay award in full and on time. As would-be leader his famous concern for prudence is likely to be gnawing away as he nail-bites his way to a decision.

A tip from across the channel

The parallels with the Airbus case are strong enough to be worthy of consideration.
In an earlier post I suggested that:

There are times in politics, when as in chess, the leader has to find a waiting move. In chess, the idea is to move without disturbing the delicate balance in a complex and dynamic situation. You do best by effectively not disturbing the status quo. … So it was in Toulouse. Facing angry Unions, represtatives of the Company’s French leadership, and the wider international press, he signals two somewhat contradictory positions. Yes, he will ‘stand by’ and ‘do his duty’ to the interests of the French employees. But in the longer term, he does not rule out selling the Government’s stake in the company. I will return, he promises. In July. When he will be accompanied by his new friend Angela [Merkel]. If not masterful inactivity, we have seen an example of how to create a little wriggle room in a tricky situation.

Gordon, who would have made a good chess-player if he had not chosen other pursuits, has to find a waiting move. He will try not to upset the nurses. That would never do. He will try to appear not to have been forced to act by political opponents. That will never do, either.

And so we will not have long to wait to find out what happens next. The next game in the leadership match is starting, and Gordon Brown’s clock is ticking away.

Update

Later, May 28th 2007. Gordon brown’s website has a vote on issues of the week. Voters were opting for the NHS by a narrow margin (over international affairs).


Airbus is an early test for Sarcozy

May 18, 2007

791px-farnborough_air_show_2006_a380_landing.jpg18-nicolas_sarkozy.jpg_41385977_seamusheaney203.jpgNicholas Sarcozy discovers that Airbus will be one of many issues which will require his attention as President. At present, he may be able to do little more than signal his awareness of its significance. He is unlikely to have a long honeymoon period.

The energetic M. Saroczy moves quickly to the scene of potential troubles over the future of Airbus employees in France. The company serves as an interesting indicator of his leadership style early on in his Presidency.

He arrives at the firm’s Toulouse headquarters with plenty of experience and preparation for what he will do. While it has not dominated the recent Presidential campaign, he will have had as much time then, as he is likely to have in the future for considering his plans. His call then was for a strengthening the leadership of the company through attracting new investors to its board.

In the election battle he avoided addressing the immediate production difficulties and the longer-term strategic and governance issues which have been the preoccupations of Louis Gallois.

For all Sarco’s intentions, it is hard to see him being in a position to make a difference in the short-term. The workforce has already begun action direct. He comes as the newly appointed champion of the Right. A gesture of masterful inaction is likely to be his best outcome at the moment.

Some words of advice: Listen to the poets

Across the channel, an historic election recently resulted in the appointment of leaders to the new power-sharing assembly of Northern Ireland. The challenges facing the leaders are as tough as any facing Sarcozy.

In his acceptance speech, deputy leader Martin McGuinness recounted advice he had been given. He had chosen Seamus Heaney as his mentor. The great Irish poet had urged him to pay attention not to togetherness, but to working and celebrating ‘otherness’.

Not bad advice for Nicholas Sarcozy. Also, as a general principle, listen to the poets. Their worlds, and words, in another inspired phrase borrowed from Seamus Heaney, offer us redress to our assumptions and beliefs. That’s maybe a worthwhile leadership principle of itself.


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