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Fri, Jan 11, 2008

EADS Chief Plans US Shopping Spree In 2008

Says Low Dollar Makes This "The Right Time To Strike"

One big trend noted by retail analysts in 2007 was a surge in shopping trips by Europeans to the United States. The dramatic fall of the US dollar's exchange value against the euro has made vacations, luxury purchases, and even real estate irresistible values to anyone with euros in their pockets.

In 2008, Airbus parent European Aeronautic Defense & Space Company plans its own shopping spree in the US. Chief Executive Officer Louis Gallois hinted at the strategy last year... but made it even more clear Thursday, telling the Associated Press, "Now is the right time to strike in the US because the dollar is very low."

Gallois has complained in the past about US monetary policy, saying that for every 10 cents the euro gains in value against the dollar, Airbus loses one billion euros, or $1.5 billion. Because Airbus incurs development and manufacturing costs defined mainly in euros, then sells aircraft in a marketplace denominated in dollars, it has found itself at a big disadvantage to Boeing. In 2007 alone, the euro gained about 12 per cent in value against the dollar.

While he hasn't made his shopping list public, Gallois says EADS will target medium-sized companies in the US. He further suggests by 2020, EADS should locate 20 percent of its workforce, and acquire 40 percent of its supplies, outside Europe.

As for dealing with union resistance to his ideas, Gallois proposes, "We won't move plants from Europe to the US, but some of plants in Europe could shift their additional work."

Gallois also repeated an earlier assertion that EADS is hurt by having so much of its business concentrated in Airbus. Two-thirds of EADS' sales come from Airbus jets. Gallois says he envisions a revenue mix in which weapons production represents 50 per cent of EADS business in the future. The company is already partnered with US-based Northrup Grumman to bid for the US Air Force's KC-X tanker contract, using a design based on the Airbus A330 airliner.

As for the sales race between Airbus and Boeing, EADS is set to release 2007 Airbus sales totals next Wednesday. Boeing has set the bar high, announcing it set a new single-year company record with 1,413 airliner sales.

Asked by the AP whether he thought Airbus would beat that number, Gallois was non-committal, saying, "Customers see Airbus and Boeing as equals, and that's the only thing that matters."

FMI: www.airbus.com, www.eads.com

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