Will Take $680 Million Q1 Charge To Pay For Cuts
After weeks of speculation, the worst-case scenario came true
for workers at European planemaker Airbus SAS Wednesday morning.
Under parent company EADS' controversial "Power8" restructuring
plan, the world's largest commercial aircraft manufacturer will cut
10,000 jobs over the next four years, and either sell or find
partners for six factories in France, Germany, and the UK.
Airbus CEO Louis Gallois said the drastic measures are
necessary, in order to slash some $2.8 billion from annual spending
by 2010. Bloomberg reports the planemaker will take a $680 million
hit for the first quarter of FY2007 to pay for the cuts.
At the moment, Airbus has over 56,000 employees throughout its
plants in the United Kingdom, Spain, France, and Germany. Bloomberg
states the restructuring plan calls for 3,200 jobs to be cut at
French factories, and another 1,100 corporate-level jobs at the
company's Toulouse headquarters. German facilities will suffer
3,700 job losses, with 1,600 UK workers getting the axe and another
400 in Spain.
Airbus plans to court partners for three plants -- Filton in the
UK, Meaulte in France and Germany's Nordenham. The company will
sell its Laupheim, St. Nazaire-Ville and Varel plants outright.
"We should have done this many years ago at the time when we
created Airbus," said Gallois, referring to the integration of
Airbus as a single company in 2000. "Boeing was in difficulties
then, the dollar was strong, and we were selling airplanes like
Today, the only hands-down success for Airbus is its narrowbody
A320 family, which continues to narrow the order gap against
Boeing's 737. To continue the "bread" analogy... the planemaker's
current widebody offerings, the A330 and A340, have grown stale in
the marketplace, against Boeing's reinvigorated 777 line.
The planemaker's newest widebody offerings, the A380 superjumbo
and the A350XWB, are the reason for much of Airbus' current
economic misfortunes. A series of production delays have plagued
the A380, pushing its scheduled delivery date 22 months past what
was originally promised. Last year, the company's original A350
proposal underwent a costly redesign, to make it more competitive
against Boeing's upcoming 787 Dreamliner.
Airbus has also suffered
against a weakening American dollar. Airbus' parts and production
costs are in euros... but the planes are sold in dollars. That
helped the planemaker accumulate significant profits a few short
years ago, when the euro was weaker; today, the tide has
Analysts agreed with Gallois, that Airbus needs to cut its
largesse to regain its footing.
"[Power8] finally brings EADS towards market reality," said
Frost and Sullivan senior defense analyst Christopher
Workers aren't likely to agree with that dispassionate analysis,
however... and many have promised to fight the loss of high-paying,
high-benefit jobs with the planemaker.
"When you're hired at Airbus it's not the same thing as being
hired elsewhere," said Xavier Petrachi, who represents French
Airbus workers in the left-wing CGT union. "It's not the same
salary, not the same statute, not the same working conditions."
As of Wednesday, though... those conditions have officially