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.


UBS BOARD CLUBS WUFFLI VERY ROUGHLY

July 7, 2007

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Peter Wuffli departs as CEO of Swiss Banking giant UBS. But his departure was far from plain sailing for the board members who had convened in Valencia to support the Swiss team in the America’s cup. Although allegedly supported by Chairman Marcel Ospel, Wuffli has taken the hit for recent operational setbacks. Are we seeing an example of a corporate culture compulsively attracted to boardroom battles in response to commercial difficulties?

From time to time in these posts we have remarked on a company that seems to suffer a series of board-room conflicts, and attempted coups. The departure of Peter Wuffli of UBS makes a nice case for studying such board room battles, and considering whether there might be an underlying pathology in corporate culture contributing to a tendency towards repeated dismissals of their leaders.

The Financial Times today suggests that Peter Wuffli has paid the price for UBS stumbles’. Peter Wuffli is a highly regarded manager. His stumbles seem to centre around a failed in-house fund (Dillon Read Capital management). The share price of USP has held up well.

In Europe News (BusinessWeek) it is argued that UPS is finding it difficult to cope with competitive pressures but calls the shift ‘clumsily handled ..and bound to create unease inside the bank and raise questions about the bank’s future direction.’

Zurich-based financial giant UBS has a disconcerting habit of dispensing with senior managers without warning. Luqman Arnold was shoved out as chief executive officer in December, 2001, and replaced by Peter Wuffli in circumstances shrouded with mystery. Wuffli will leave the bank and be replaced by Marcel Rohner, the deputy CEO and chief of UBS’s most valuable business, private banking (or Global Wealth Management, as it is officially known).

Marcel Ospel and the Board

The key figure in the board room carnage is the powerful Chairman of UPS, Marcel Ospel. The official version of events has Ospel seeking to win board approval for Wuffli as his own replacement on stepping down next year. This week he reported that the board rejected his proposal indicating that such an appointment was not in the outgoing leader’s gift. The board also had reservations about Dr Wuffl’s performance.

Something doesn’t add up

There’s something that doesn’t add up in the official version of events. The board is stacked with powerful and experienced executives, leaders in their own right. They are widely believed to be largely hand-picked by Marcel Ospel. Observers have doubted that they would oppose him on a matter of judgment over a propopsal that he felt deeply was in the interests of the company.

Furthermore, the indications are that the board of USP continues to support Ospel’s strategy and has indeed nominated him for a further term as leader (chairman).

I can’t see how things have turned out as they have. If Marcel Ospel was all-powerful and had stacked the board with his appointed supporters why and how did they oppose his wishes?

If they resisted his efforts to appoint his favored candidate, why were they keen to appoint Ospel for a further term, against his original wishes. Did they feel that, unlike Wuffli, the chairman had made no significant contribution to the travails of the company since 2001? I have no doubt that further information will emerge on these matters.

Permanently conflicted cultures

A suggestion. Corporate culture remains a fuzzy concept. Maybe there is some merit in an investigation of permanently conflicted organizations. The condition is more commonly recognized in political organizations, with a relentless internal battle for the top jobs within political parties. We might be able to identify the early-warning symptoms, with the potential for remedial actions (as accompanies analyses of an organization’s financial state of health).


Magic Madge keeps Pearson in the Pink

January 24, 2007

Shares of the Pearson publishing group hit a five-year high this week. City analysts upgraded its prospects. CEO Dame Marjorie Scardino has received the brickbats in its years of decline and now earns the plaudits in its renewal. Rumors persist that the Financial Times remains an attractive target for an asset raider. Will Dame Marjorie stay to savor the fruits of success, or will she became a hostage to the fortunes of The FT, whose pink pages have come to symbolize the early-morning reading matter of City commuters?

When shares at the Pearson group hit a five year high this week, city analysts upgraded its future prospects. CEO Marjorie Scardino also celebrates ten years as leader of the publishing group, and her sixtieth birthday. Have a nice one, Lady M.

Only FT100 female CEO

It has been a turbulent ten years. Marjorie Scardino was the first woman to lead a major (Footsie 100) company. In her early time as leader, she put in place a policy of disvesting non-core assets (such as the high profile Madame Tussauds). She was lauded in the city, and Pearson shares started to pick up. But the gain occurred during the dot-com boom. Shares rocketed, and then equally rapidly fell precipitously. Her big investment in acquiring National Computer Systems (NCS) at the peak of the boom was particularly criticized as an expensive error of judgment. Scardino’s personal stock also slumped.

Courageous moves

Critics identified the Financial Times as a source of volatility at Pearson’s, and its sale a possible opportunity for consolidation. Scardino linked her future to retaining the FT, as her ‘over my dead body’ quote indicated. The unspectacular recovery of the share price four years had just about fended off the criticism of City analysts.

The current reappraisal reveals that the decision to acquire NCS was as shrewd as retaining it was courageous. It places Pearson at an advantage over other media rivals such as Reed Elsevier who have not invested as thoroughly in educational technology.

Is Pearson’s future stabilized?

Possibly not. The thrust of criticism remains, that the group’s assets are not integrated (that unlovely buzz-word) to deliver synergies (that even uglier buzz-word). As recently as last year, new Chairman Glen Moreno indicated his concerns on the UK’s operating structure and performance. Critics see the potential for asset raiding. And the jewel in the crown is the FT. Other much loved brands such as Penguin are also vulnerable.

Is Dame Marjorie vulnerable?

Possibly. Chairman Glen Moreno says the company has no succession plans in hand for her job. A lingering doubt remains. ‘Back me, back my brand’ was her watchword over the FT. Which also translates to predators as ‘Ditch the Bitch, and Deliver the Brand’. In which case, the Private Equity poker players will be doing a good job at losing a good leader, which are hard to find. Scardino’s protégé Rona Fairhead head of the FT group also becomes vulnerable. The winners in such a battle are likely to end up with the leader they deserve.


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