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A380 cable problems threaten Airbus
By Sebastian Steinke
Christian Streiff's very first official duty on taking up his appointment as Airbus CEO in July – he has since retired again – had been to order a new investigation into the increasingly alarming A380 production delays. He then took the unusual step of publicly announcing the results of this investigation alongside the joint chief executives of parent company EADS, Tom Enders and Louis Gallois, and EADS Chief Financial Officer Hans-Peter Ring on 3 October.
“The production process, not the aircraft itself, has a critical error. This is the weakest link in the entire production chain and has been preventing us up to now from ramping up to the full production rate. The problem is to do with the design of the electrical cable harnesses for the fore and aft fuselage. This comprises 530 kilometres of wires which are connected to 100,000 individual cable sections with 40,300 connectors and 350 kilometres of length per aircraft. The A380's wiring is twice as complex as the A340-600's.
“The analysis we have performed in recent weeks suggests that the situation is much worse than we had feared. There were incompatibilities in the electronic design program with which we developed the cable harnesses and their layout. The cable harness installation kits for the front and rear fuselage could not therefore keep up with the rest of the aircraft and did not fit when they came to be installed. Moreover, we did not have enough time to change the cables during the development phase. Now we face the task of having to harmonise the design software and the database. But this will take some time.”
Apparently the problems arise above all from the use of different software versions of the market leading 3D design program, CATIA. Whereas the Airbus factories in Germany and Spain were using the tried and tested older version 4, the factories in France and the UK converted to the latest version 5 during the A380 development period.
The differences between the two versions of the software are far-reaching: whereas the older version was coded in the Fortran programming language and runs under UNIX on relatively powerful workstation computers, the more recent version 5, which is outwardly geared towards Windows and can also run on PCs, uses the programming language C++.
Underneath the interface these two programs are completely different and they also generate different types of file. As a result there are complicated interoperability problems when data from version 4 has to be passed to version 5. The result is that outside the bare design plans, many electronically appended engineers' “notes”, which are used, for example, to specify shapes and curves on individual workpieces, get lost. Again, data relating to cable clips is frozen as regards shape and size upon the change of generation and can no longer be easily adjusted afterwards. Apart from this, cables, unlike fixed structures, constitute one of the most difficult areas to design in CATIA, as it entails moving between two- and three-dimensional drawings.
According to Streiff at the beginning of October, theoretically the electronically integrated design software boosts productivity five- to six-fold, compared with classical design methods. However, the personnel have to undergo time-consuming training for every new version. Just migrating experienced CATIA engineers from version 4 to version 5 in practice apparently takes between six months and a year of training until they regain their full capacity. In the car industry, different CATIA versions are used in parallel for a transitional period for this very reason.
To enable the smooth transfer of data despite this difficulty, Airbus developed its own translation software, Airbus Concurrent Engineering (ACE), with Germany in the lead role. According to statements made by former A380 programme manager, Charles Champion, to the Bloomberg News agency, despite all this the transfer of data from Germany to Toulouse had still not worked as hoped. As a result, the German side apparently were not able to feed their design plans for the cable harnesses into the standard and continuously updated database of the A380 Digital Mock-up, as they were supposed to do.
The German development work for the cables in sections 13 to 18 suddenly turned into an isolated solution, while the A380 design plans for the adjacent sections 11 to 12 and 15 to 21 underwent continuous further development in Toulouse, especially once practical data from flight testing and structural tests became available. Christian Streiff explained: “The problem first manifested itself when the electrical cable harnesses were due to be installed in the fuselage. The planned cable routes no longer agreed with those on the real aircraft.”
Nevertheless, Streiff defended the Airbus site in Hamburg and the workforce, since, “I can say with certainty that the problems are not the fault of the design team responsible for the electrical systems in Hamburg. Airbus is a single company. Airbus as a whole has failed. Management at several levels and of different nationalities are to blame and definitely not the teams in the production facilities.”
To steer the present A380 corrective work chaos back on track as quickly as possible so that it can be fully controlled, Streiff appointed cabin expert Rüdiger Fuchs to have sole responsibility for all A380 activities in Hamburg. He is supported by an extended team of experienced Airbus staff and will check programme progress twice a day. Fuchs will report directly to the new A380 programme manager, Mario Heinen of Luxembourg, who had previously successfully managed the A320 programme.
On top of this, experts selected from across the company are to complete the electrical cabling of the first 15 A380's. This will also entail specialists from Broughton and St. Nazaire assisting their colleagues in Hamburg and Toulouse. However, although the organisational procedures will be greatly improved, the complicated mixture of CATIA versions 4 and 5 will remain in operation. MSN003 will be the first prototype to be fitted with the revised cable sets and will also serve as a “teaching model”. The other “pre-series aircraft” will then be upgraded to the standard, final cable sets.
In parallel with this, all the cable harnesses are to be reviewed and redeveloped as necessary by a multinational Airbus team using the more recent version 5 of the CATIA software, so that from the 16th aircraft a single CATIA 5 dataset will be available at every location for final series production.
According to the latest plans, the first A380 in customer configuration will not now be handed over to launch customer Singapore Airlines(SIA) until October 2007. This is likely to be the only aircraft delivered in 2007. The 13 aircraft now planned for delivery in 2008 to SIA, Qantas and Emirates, will be well below the originally planned unit numbers. 25 A380's will then be delivered in 2009, and only in 2010 will production finally attain the full rate of 45 aircraft, including the first A380F.
The excessively long drawn-out problem over the A380 cable design is now having a particularly unfortunate effect on the cash flow of Airbus and EADS. Due to the delays in A380 deliveries, EADS expects its earnings before interest and taxes (EBIT) to be Euro 4.8 billion lower for the period 2006 to 2010, although this is not entirely pure loss. At least Euro 2 billion of this money will still come in, but only from 2010. On the other hand, compared with the original plans there will be additional charges totalling Euro 2.8 billion for “non-recurrent expenditure”, according to EADS. All in all, the aerospace company calculates that the company's free cash flow will be reduced over the period 2006 to 2010 by Euro 6.3 billion.
It remains to be seen whether any A380 customers will bail out and how expensive it proves to settle the airlines' claims to compensation for delayed delivery. For example, Air France and Lufthansa will not now take delivery of their first aircraft until, respectively, the spring and autumn of 2009. According to information provided by EADS on 19 October, the breakeven point of the Euro 12 billion A380 programme has now risen from the once planned 270 units to 420. On the other hand the Airbus market researchers are still expecting 751 A380's of all the various versions to be sold over the entire programme duration.
The financial losses are hitting Airbus at a relatively favourable moment, as the A320 family continues to be a genuine sales success which brings cash into the coffers with every delivery. Just this year, Airbus will deliver between 420 and 430 aircraft of all types, thus setting a new record for the company, and this high production rate is expected to be maintained into next year as well. Moreover, the company has an extremely healthy order backlog of 2,100 aircraft, sufficient for four and a half years of full production.
But at the same time Airbus now needs every Euro it can lay its hands on, given that the programme launch of the revised A350XWB is expected at the end of November. To enable it to realise this strategically crucial competitor to the Boeing 787, and in the undiminished high-tech version of it as well, before one day it will be necessary to announce an A320 successor, it needs a full “war chest”. Meanwhile the Euro continues to appreciate against the dollar, the currency in which all aircraft sales are handled, so that Airbus production in the Euro zone is becoming more expensive. Half of all Airbus's expenditure is still in Euros.
Christian Streiff has therefore launched the Power8 cost reduction programme, which is to run for a period of four to five years. The programme, which has been developed by 100 experts over the last three months and is to be perfected by the end of the year, is intended to increase productivity by 20 percent primarily through leaner production methods, more favourable purchase prices and inter-site competition. The idea is that it will then be possible to cut costs by Euro2.1 billion per year and to significantly shorten the time it takes to develop new programmes and hence to reduce their cost. By 2010, these savings effects will come out to about Euro 5 billion. As part of the cost-cutting exercise, a review of all the Airbus locations is to be conducted, to be completed by the beginning of next year, and administrative costs are to be reduced to the tune of 30 percent.
The question of whether to move part of the A380 production and delivery from Hamburg to Toulouse is also to be debated, the idea being that A320 final assembly would then be relocated from Toulouse to Hamburg. But whether Airbus would actually save any time and money if the brand-new, custom-built A380 halls in Finkenwerder now had to be rebuilt in Toulouse appears questionable.
Whereas Christian Streiff had planned to decide on his economy plans for Airbus largely independently, without paying a lot of attention to “old ancestral estates”, the EADS parent company wants to be a lot closer to its subsidiary Airbus in order to avoid any further surprises. The result was an internal management dispute.
When a detailed study of the European aerospace industry by investment bank Goldman Sachs, a copy of which FLUG REVUE has seen, finally suggested that for cost reasons, amongst other measures, the number of Airbus sites should be halved, German politicians at regional and national level right up to Chancellor Merkel all expressed alarm.
Airbus, from which the British have just legally implemented their exit, and EADS were even among the topics discussed at the summit meeting of the French and German heads of government. The discussion topics included a possible EADS share purchase by the German government or one or more Länder in order to preserve the current Franco-German balance after DaimlerChrysler has reduced its shareholding from 22.5 percent to 15 percent. However, DaimlerChrysler CEO Dieter Zetsche and EADS Co-CEO Tom Enders were sceptical about getting the German state involved. At the time of going to press, talk of discussions about a consortium of investors, including Deutsche Bank, Goldman Sachs and the Development Loan Corporation (KfW), sounded more likely.
The crisis dominated the headlines for days. There was no respite until one of the two EADS chief executives, Louis Gallois, took over at the helm of Airbus on 10 October. Gallois promised a fair distribution of loads only in general terms. Christian Streiff, who due to lack of internal support had already threatened to resign on several occasions, finally left the company after only three months. But Gallois, who is Streiff's former boss as well as his successor, announced that he would continue the various elements of Streiff's recovery strategy. Final details on the site strategy are unlikely to be forthcoming before the beginning of 2007. It seems likely that several Airbus factories will be hived off and then contribute their products on more favourable terms as independent suppliers. One model as to how this might work could be the hived-off Boeing factory in Wichita, Kansas, which today operates under the name Spirit AeroSystems and, amongst other things, supplies fuselages and wings for the Boeing 737.
Already on 17 October Airbus Deutschland announced a package of measures “SiduFlex” (German acronym for “security through flexibility”) which would run for a two-year period. According to this, 1,000 out of 7,300 German contract staff will lose their jobs. Moreover, as much work currently in the hands of outside contractors as possible should return to the company. Permanent staff will no longer receive overtime payments but will be able to bank their extra hours worked as flexitime. Other working hours will be reduced to up to 28 hours, but with full pay retained.
At least there is some good news from the cause of all this trouble, the A380: flight testing has reached a sufficiently advanced stage that Airbus now expects to receive the official A380 certification before the year is out.
From page 22 of FLUG REVUE 12/2006
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