FLUG REVUE July 2004: Hertrich outlines EADS plans

RAINER HERTRICH

The Chief Executive Officer of EADS and President of the German Aerospace Industries Association (BDLI) talks on the ambitious plans for the European aerospace giant.

FLUG REVUE: EADS has had some major successes to celebrate: Airbus is the Number One in airliners, Eurocopter is maintaining its position at the top of the global helicopter league and, now that EADS has won orders for tanker aircraft from the United Kingdom and Australia, the defence side of the business is growing. Is EADS on the way to displacing Boeing as the biggest aerospace conglomerate in the world?

Hertrich: Yes, our long-term vision for the future is in fact to become the Number One in our industry. But in any case, I think we will maintain our lead in civil aviation over the next few years. In defence and spaceflight, Boeing of course has the huge advantage of an enormous, unrivalled domestic market. But with the present weakness of the dollar, the gap between us is no longer so big. Over the next few decades the critical factor will be how much growth we can achieve in Asia and other world regions.

FR: North America is the most important market for aerospace. How can EADS get a share of that market?

Hertrich: We have already won a large slice of that market. We make over Euro 8 billion a year there. Even in the USA, Eurocopter is the biggest supplier of helicopters to the civil and state markets, the only exception being business with the Pentagon. Airbus's market share in the USA is growing, and is not far off from equalling Boeing's share. Now we want to break into the defence market. With our highly competitive and modern products, we will succeed, either through transatlantic co-operation, as the partner of American companies or in direct business with the Pentagon. We are pursuing every possible avenue. It takes time, but we are doing just that.

FR: Will aerospace leading-edge technology depend for its financing on international collaboration in the future, and what role will the national funding of research play in this?

Hertrich: As far as Europe is concerned, the answer is definitely yes. In our industry, research and development of both civil and military leading-edge technologies which ultimately are to flow into product applications are only possible at the European level. Nevertheless, national funding of research continues to provide the basis. In our view, the development and production of future technologies is inextricably tied to collaboration between European national competence centres, as the most efficient and the only politically viable avenue. But national competence centres only develop and grow if they have an adequate national base. The best example is spaceflight. Unless our national core competencies remain a focus of central government research funding and are nationally strengthened, they will be at risk of going by the board. Among our European neighbours, there are many who are just waiting for Germany to lose its innovative momentum. Then it will become obsolete and Germany will be out in the cold in the long-term. National research funding is a way of safeguarding the future, and therefore it is the need of the moment, today more than ever.

FR: Thanks not least to EADS, aerospace has become very strongly integrated at the European level. In this respect is it setting an example for industrial collaboration in Europe?

Hertrich: For comparable industries with similar markets, yes it is. And above all, EADS is a proof of the fact that European integration is feasible, creates extra value for all those involved and permanently strengthens Europe's competitive position.

FR: Has EADS developed into a genuine supranational corporation, or do national factors still play a role at EADS?

Hertrich: Today we are more and more an international company. But we are and remain Frenchmen, Germans, Britons, Spaniards, Americans, Finns, Australians and all the rest. And in defence and spaceflight, we continue above all to move in nationally determined markets. Anyone who doubts that national interests still play a role at EADS does not know us. But the critical factor for us is that everyone in the company knows that we are following entrepreneurial objectives. It is a matter of innovation, best products, best technologies and best service for our customers.

FR: What are EADS's short-term entrepreneurial objectives?

Hertrich: This year we intend to take spaceflight out of the red and push ahead with restructuring. And we intend to achieve significant growth in defence as well. In aviation, our goal for 2005 is to once again achieve growth in deliveries and incoming orders. Then, of course, the maiden flight of the A380 is less than a year away, and deliveries of the NHS 90 will begin before the end of this year. We must respond to the challenge of the weak dollar and continue to push ahead with the internationalisation and globalisation of our company.

FR: How much autonomy do Group brands like Airbus and Eurocopter have?

Hertrich: They have their own market presence and they are responsible themselves for their financial success. But they are part of the EADS company which is listed on the stock exchange. This creates stability for the volatile aerospace industry, it was the critical factor that made the launch of the A380 programme financially feasible, it guarantees access to new technologies and markets and creates a group which produces a whole range of synergies for everyone. The success of Airbus and Eurocopter is the success of EADS. But at Airbus we are also mindful of the fact that BAE Systems has a 20 percent financial stake in the company.

FR: Which part of EADS will have the strongest sales in the future?

Hertrich: Airbus - of course. The A380 alone will increase turnover in the medium-term by 5 to 6 billion euro per year. But in 2003, most of our growth and profitability came from the defence area. That shows that the grouping of civil and military business contributes to the stability of all in the long-term.

FR: Could EADS concentrate on a role as system provider and achieve greater production flexibility through outsourcing?

Hertrich: In large parts of EADS that is already a reality. This trend will gain momentum as we expand our systems house in defence. I have always said that suppliers will play a bigger role in the future, and for that reason we also expect them to take on greater responsibility and more risk, though this also opens the way to more opportunities and potentials. We definitely have no interest in increasing our value creation vertically. But we must also retain and further develop in-house core capabilities at component and subsystem level. These already play a significant role in the creation of competitive advantage in our products.

From page 27 of FLUG REVUE 7/2004

Last updated 11 June 2004

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