Airbus CEO Resigns...Really...I'm Serious This Time

EADS has finally announced that Airbus Chief Exec Christian Streiff has well and truly resigned and that his resignation has been accepted by EADS and that his replacement will indeed be ex-Aerospatiale and current EADS co-chief exec Louis Gallois. In other words, everything that EADS and Airbus tried to refute over the last few days has turned out to be true. Everything...seems like a lot of wasted effort. Speaking of wasted efforts Streiff's departure after a mere 100 days should be viewed as an alarm that grows louder everyday. Consider Streiff's parting shots given to France's Le Figaro newspaper:

"I hope that (my resignation) will provide a salutary shock that forces a rethink about how Airbus is governed,"

"The organization and governance of EADS have as major objectives the preservation of a delicate balance between men, power and positions," Streiff told French daily Le Figaro on Tuesday. "This formula can work in normal times, but it is not appropriate for a firm that is going through a serious crisis."

the "governance of Airbus" would not allow his cost-cutting plan to succeed. "It is not a problem of men," he said, explaining that he personally had no issues with Gallois or EADS co-CEO Tom Enders. Instead, Airbus suffers from "a problem of structure," he said, asserting that EADS needs to give the manufacturer more autonomy to make decisions and carry out initiatives. He added that Airbus's production facility in Hamburg, where A380 assembly is centered, has "problems" and is the company's "weak link."

Normally I stay away from "industry" sources but they were all dead on regarding this situation so I will offer up this commentary:

An industry source who closely watches EADS said Streiff's position had become untenable after he exposed deep flaws in Airbus's industrial methods and raised the prospect of sensitive job cuts without adequate political cover.

And therein lies the rub. Streiff apparently made the mistake of offering his honest assessment when he called the Hamburg Airbus plant as "the weakest link" in the A380 production process. A smart business assessment, perhaps. A political bomb, absolutely.

My read on Streiff's departure is that the mix of business and politics at Airbus/EADS made the recovery of the A380 program impossible to achieve in the timeframe being demanded. Faced with an inability in enact the plans he felt necessary to bring about the needed changes Streiff seems to have seen the writing on the wall.

The funny thing is that time may bear out Streiff's assessment. New Airbus head Gallois has wasted no time in stating that their will be job cuts, its his first day on the job folks. He also states that cost-cutting will be evenly distributed between French and German operations. Take careful note, Gallois did not say that job cuts will be evenly distributed, he said cost cutting measures...the two are not necessarily equivalent. People...Streiff is the third CEO to depart Airbus since May 2005...maybe he's not the first to recognize the deep issues at Airbus.

Airbus Head Has Has Not Resigned

The difficulties in running a multi-nationally controlled company like Airbus came to the forefront late last week as we watched rumors flying about Airbus head Christian Streiff. Things kicked off with reports that Streiff has offered his resignation followed by denials from Airbus and EADS that his resignation had been accepted. It appears that Streiff is making a statement. To me that statement is to let him run the company and take the actions he deems necessary or accept his resignation. Because the job he has to do is going to be unpleasant and is going to stir up a lot of nationalism and politics. Airbus needs to cut costs to blunt the effect of the money being poured into the A380. There are talks of outsourcing and re-organizing Airbus divisions. Airbus partners Germany and Spain are already trying to assure workers at plants in their countries that all things will be considered before making decisions. Officials from the French and German government will be meeting so now things will get very sticky. Mixing business and politics is tough and often slow. Streiff needs to act fast to stem the bleeding at Airbus. Good Reuters article here.

Besieged at EADS/Airbus

As long as we are talking about Airbus and EADS today lets step back and try to summarize all the fronts they are battling on:

A380 Program: Delays along with recent departures of key individuals from the program

The less-than-amicable departure of long time partner BAE. BAE cites the A380 progam as a contributing factor in the decision to sell off their 20% interest

Depressed stock value (30% decrease since the beginning of the year) thanks in part to the A380 delays and unknowns with the A350 re-design.

The unexpected purchase of 5% of EADS stock by Russian investors and increasing pressure by Russia to gain influence at EADS. All this thanks to the aforementioned depressed stock value.

A350 redesign project due to demands from their customers that they do something to with their current long range aircraft product line. The project is still on the drawing board and only Aeroflot is committing to the aircraft so far.

Heavy competition from Boeing's 787 drawing interest and orders away from future A350 variants.

Increasing interest in the upcoming Boeing 747-8 as a alternative to the A380 causing airlines around the world to re-think their long term strategy.

EADS and Airbus have their hand full but I am not counting them out. Airbus has proven to be a very shrewd competitor to Boeing and has made some good decisions in the past. Unfortunate for them that several issues have coalesced at the same time forcing them to divide their efforts. Stay tuned...

A380 Loses Ground Again

Another delay on the A380 has been rumored for about 2 weeks now and today, finally, Airbus is confirming the rumors (Reuters article). What remains unknown at this point is the impact this delay will have on delivery schedule. Airbus parent EADS issued the following statement:

"Although the company's assessment is still under way, continuing industrialisation challenges with the wiring of production aircraft have been identified and are being tackled," EADS said in a statement.

"Consequently, from what is known today, there will be further delays."

This is all a very nice way of saying that we screwed up the wiring again.

Airbus claims they will still deliver the first A380 to Singapore Airlines in Dec 2007 and that delays will impact deliveries beyond that. My bet is even that delivery is in jeopardy at this point.

Lufthansa Compensates for Late A380

Lufthansa announced yesterday that they are placing an order for 5 A330 to "compensate for the delayed entry into service of the A380,". To me this lends credence to the persistant rumor that additional A380 delays are going to be announced after EADS completes its audit. The A330 will be delivered in 2007 and 2008 to service routes that Lufthansa has planned to handle with the A380.

Aeroflot Decision on Next Aircraft Definitely Not Indefinite

Apparently "indefinitely" is a lot shorter time span than I thought. Just last Friday Aeroflot said the decision on their next aircraft purchase was on hold indefinitely. Then Monday an Aeroflot shareholder decided it made good business sense to lock in the deal for the Boeing 787. But that deal was not blessed by the Russian goverment who are trying to leverage some influence with Airbus parent company EADS. Today, Aeroflot is announcing that they will purchase both the Boeing 787 and the Airbus A350. The purchase would be staggered with 22 787s being delivered 2010-2012 and 22 A350s from 2012-2016. Apparently this decision has appeased the Kremlin and both deals will receive the endorsement of the Russia government.

Aeroflot Delays Decision on the Next Big Thing

Aeroflot had been poised to make a $3 billion commitement on 22 long range aircraft until it announced late last Friday that this decision would be delayed "indefinitely". The Boeing 787 was seen as a front runner since its most direct competitor, The Airbus A350 is still on the drawing board without any buyers yet. Spin control has local media reporting that Aeroflot doesn't really know what they want. But it seems to me there is a fair bit of politics running amok here. Reuters is reporting that Russia is in "bilateral talks" with the U.S. as it tries to join the World Trade Organization while a Russian bank has just purchased a 5% stake in Airbus parent company EADS. According to the article the Kremlin has been seeking some influence in the business decisions at EADS. So what will win, world politics or state interests?