EADS Still Struggles To Fund New Airliner

It's either one or the other for EADS: find more money, or find a way to cut costs -- that's the only way the company will ever get Airbus' A350 XWB program off the ground.

Last week two major board meetings were called off because of disagreements between the major players. EADS still hasn't given Airbus approval to start work on the new airliner. Experts place start-costs for the program between ten and twelve billion dollars.

At least one of the company's largest stake holders, DaimlerChrysler, says its not going to pay. Its CEO Dieter Zetsche says EADS will need to find another way to fund the program's development.

DaimlerChrysler is actually looking at ways to reduce its stake in Airbus parent EADS. It's been in talks with the German government to ensure whatever plan it comes up with doesn't upset the balance of power between France and Germany in the governance of EADS.

He told Reuters, "Obviously, when on the one hand, we are just diminishing our stake in a defined way, it is counter-intuitive at the same time to discuss -- and even less decide on -- an equity increase."

DaimlerChrysler has said it would like to cut its stake in EADS to 15%, from 22.5%.

Airbus is looking at ways to cut costs, including outsourcing. Company President and CEO Louis Gollois told Reuters, "On the A350, our plan is to outsource 50 percent of the airframe production, which would allow us to hand over (part of the project) to partners participating in the development. The target is 1.8 billion euros ($2.35 million). We have started talking to candidates."

Some industry insiders however speculate talk of outsourcing might just be a ploy to rattle the many governments with a stake in EADS' future. Countries facing job cuts might be more amenable to coughing up the cash EADS needs.

FMI: www.eads.com