FLUG REVUE February 2005: EADS has new top management

February 2005

TUMULTUOUS LEADERSHIP CHANGE AT EADS

By Volker K. Thomalla

The wrangling over the personnel at the head of EADS dominated the headlines of the business press in the middle of December. Was it just a dispute inside the company? Or was the French State trying to increase its influence in the company and demonstrate to its German partners who calls the shots by trying to force important personnel decisions? Only the parties involved know the answers to these questions and no doubt they will keep them to themselves.

The public disagreement came at a somewhat unfortunate time and has made the investors sceptical. Uncertainty about the direction in which a company is going is poison to the shareholders, as was reflected clearly in the share price which, despite otherwise good company news, slipped from Euro 23 to Euro 21 at the beginning of December, when the discussions began.

At present things are going very well for EADS. In December, its subsidiaries and affiliated companies signed some important contracts. For example, Eurofighter received the order for the second tranche of fighter aircraft, while Airbus received its first letter of intent for the A350 rival to the 7E7 only a few days after the authorisation to offer. Some important new Airbus orders were also announced, like the A320 order from Air Asia, which Boeing had viewed as a strategic key order. On top of this, Australia signed the order for the A330 MRTT tanker.

Incoming orders received by the company in 2004 will be in excess of its sales for the year. This means that the order backlog is growing and utilisation of the production facilities continues to be secure.

EADS is a successful, supranational company and has succeeded in gaining recognition as such. The Franco-German leadership duo of Philippe Camus and Rainer Hertrich has contributed significantly to this.

But if customers should now change their perception of EADS to a national company or one dominated by a single nation, its market prospects in the important core markets suddenly become nil.

This the shareholders recognised and they are sticking to the arrangement whereby the top two posts are shared. The current head of Defence & Security Systems, Thomas Enders, will succeed Rainer Hertrich in the summer of 2005, while Airbus CEO Noel Forgeard will move up into the top position in parallel as the successor to Philippe Camus. The two of them will have to make a go of it together, as EADS will be facing a number of challenges. It needs to find a way into the US military market, the low dollar exchange rate is hitting Airbus's profit margins especially, and in the military area the question is now what comes next after the programmes like Eurofighter.

If the discussions of December about the dominance of one EADS partner should be rekindled or if a dispute should break out, the only winners will be EADS's competitors.

From page 4 of FLUG REVUE 2/2005

Last updated 10 January 2005

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