Delays To A400M Program Only Part Of The Problem, EADS
It was as bad as they said it would
be. On Thursday, EADS reported a third-quarter loss of $1.14
billion, the result of the combination of costly delays to a
military aircraft program, and the declining value of the US dollar
against the euro.
As ANN reported earlier this
week, EADS announced Monday it abandoned its previous
profit forecast for the year, leading to a 5.1 percent drop in the
company's stock price. EADS blamed last month's announcement of
problems with its A400M military transport aircraft program...
which the company conceded could lead to as much as 1.4 billion
euros ($2 billion US) in charges against the program.
On Thursday, EADS CEO Louis Gallois confirmed that figure... but
said not all the consortium's woes can be blamed on the A400M. The
falling dollar is also wrecking havoc on the books at subsidiary
That's because the planemaker sells its aircraft in US
dollars... but about half its costs are computed in euros. For
every 10 cent drop in the value of the US dollar against the euro,
Airbus loses about $1.47 billion in profit, reports The New York
Its American rival, Boeing, doesn't face the same difficulties,
Gallois said... as its costs are almost entirely in dollars. "There
are not many companies in our situation," he said. "We are in a
duopoly where the financial situation of our competitor is
completely different from ours."
Calling the dollar's slide a "sword of Damocles" hanging over
EADS, Gallois said managers are determined to protect the
planemaker from "unbearable" exchange-rate fluctuations.
"We have to react," Gallois (below) said in a French radio
interview. "We must find additional savings of roughly one billion
euros by 2010 or 2011.
"Nothing is excluded," Gallois later added in a separate
interview, saying possible measures might include more aggressive
currency hedging, renegotiating supplier contracts, and eliminating
more jobs -- on top of the 10,000 lost jobs spelled out under its
current Power8 restructuring program for Airbus.
Gallois did say further plant closings are likely not an option.
"We are selling sites to lighten our balance sheet," he said. "This
is not related to the US dollar."