Sarkozy's Early Days Will Be Determined By Handling Of EADS Woes

Is France's newly-elected president a believer in the free market system, or a strict nationalist who will use his power to prop up his country's economy? Those are the types of questions ANN typically leaves to entities such as The Wall Street Journal... but how Nicolas Sarkozy handles the current crisis with European planemaker Airbus could play a role in both his legacy, as well as the future of the joint partnership agreement that led to the creation of European Aeronautic Defense and Space Company.

During the presidential campaign, Sarkozy rattled the cage at EADS, by calling for changes in the consortium's increasingly volatile split-ownership structure. Following his election as France's next president last weekend, however, Sarkozy has pledged to cooperate with his German counterpart, Chancellor Angela Merkel, to ease tensions between the two dominant partners in the EADS.

But that necessarily mean anything, notes Louis Gallois, the French CEO of Airbus. "He is kissing Angela Merkel when they meet, but that doesn't mean anything," he said wryly to reporters.

As Aero-News has reported extensively, the EADS-mandated Power8 restructuring program for Airbus calls for the elimination of 10,000 jobs at Airbus facilities throughout Europe, including 4,300 in France. Not unexpectedly, the plan has drawn strong criticism from French and German workers.

Goldman Sachs economist Nicolas Sobczak tells the New York Times that Airbus will be the first big test of Sarkozy's plans for the French economy, as well as his attitudes towards theunions opposing Power8.

"Airbus could soon become a test of his plans for a more flexible labor market," Sobczak said. "It would be a good showcase to demonstrate to the unions that it's not useful to oppose a business plan that makes sense."

On the grander scale, Sarkozy's handling of the Airbus situation may eventually influence the current Franco-German management structure at EADS. Both sides maintain an uneasy dual-headed power-sharing agreement, with Gallois sharing CEO duties at EADS with Germany's Thomas Enders. The Times terms it a "balky" management structure, "that neither side particularly likes."

That means analysts and politicians alike will be looking intently for signs Sarkozy intends to increase the French role in EADS.

"Sarkozy, despite his pro-American attitude, still feels that Airbus is French and needs to be protected," said analyst Doug McVitie, managing director of France's Arran Aerospace. "He has this French attitude that Airbus is strategic for France."

Gallois -- at least publicly -- takes a more pragmatic approach, saying little about what role Sarkozy may stake in the reversal of Airbus' fortunes. Gallois does believe any reform of Airbus, however, has to start with easing the political and cultural tensions now present in EADS.

"It's because of national pride that we have the problem of the A380, and people know that," he said.

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