October 10, 2006
Streiff-torn AirbusBy Thomas Lifson
Christian Streiff's brave experiment in playing save—the—company hardball is over at Airbus. Inheriting a mess not of his own making, he laid out a series of possible maneuvers, ranging from cutting jobs to outsourcing, while proclaiming the need for a fundamental restructuring. Recognizing that the company was in mortal peril of failing, he put everything on table and dared governments, unions, suppliers, potential investors, and maybe even customers to come make their case for preserving something positive out of the fiasco.
Less than week later, the hard—nosed Alsatian executive was handed (or grabbed, depending on what one chooses to believe) his walking papers.
He was replaced by another Frenchman, Louis Gallois, the very model of the type of elite administrator for which France is justly famed. He was educated not just at the �cole Nationale d'Administration, for government bureaucratic skills, but also at L'�cole des Hautes �tudes Commerciales for commercial skills. It gets better: he is politically connected on the left, having served as cabinet director of leftist Minister Jean—Pierre Chev�nement during the presidency of Mitterand. Finally, he has run Aerospatiale, a predecessor of Airbus and EADS, as well as the highly respected French railway system SNCF — proprietor of the fastest bullet trains in the world.
Most of all, while Streiff caused a lot of strife, Gallois is renowned for his smooth diplomatic skills. He even got on well with the railway unions.
While it is tempting to take pot shots at Airbus for the chaos, this one—two punch of change agents may have some positive results in the short term, although the negatives at Airbus still vastly outweigh the positives. Streiff was the messenger who brought bad news, and paid the price that such messengers suffer at the hands of autocrats. But the issues he raised are still on table, even after his departure. His successor may have a better personality for getting results, while not sharing the blame for raising the difficult questions in the first place. Think of it as a bit like the good cop/bad cop routine, only played out with heads of governments playing the role of perp.
Now that Chancellor Merkel of Germany is focusing hard on the viability of the Hamburg works and the other 9 Airbus factories in Germany, perhaps the German treasury can be persuaded to come up with the money to buy—out Daimler's shares or extend other funds in ways which might avoid a trade war with the United States.
The Power 8 Program — still only vaguely defined as a re—do of the way Airbus does business — is still affirmed by Gallois. But many oxen will be gored by substantive change, and even diplomatic skills of the highest order cannot alleviate pain, something that is supposed to be banished in the Europe of state responsibility for everyone's happiness. Sugarcoating the bitter pills necessary to cure Airbus can only go so far.
Those pills are only targeted at the symptoms, leaving the disease unaddressed.
That disease is, of course, state—control of the enterprise. Airbus is in its present peril because it chose to invest resources in a prestige project more important as a symbol of the New Europe than as a viable product. It is suffering production snafus because it had to buy German financial support via jobs in Germany. It tried to put together the whalejets with factories in different countries using incompatible design software because nobody could tolerate the French winning over the Germans or vice versa.
The A 380 is now an albatross for the company. Cancelling it is virtually unthinkable, because it would maroon airline customers (some of whom would never forgive being stranded), because the workers would revolt, and because it would humiliate government sponsors. But the A 380 is devouring the rest of the company as it lurches about.
But there is ample evidence that devoting enough resources to fixing the 380 is starving the rest of the company of funds and technical resources necessary to carry on beyond the A 380. The A 350, intended to be a direct competitor of the Boeing 787 Dreamliner, may or may not get approval, and will arrive four years later than the first 787, if all goes according to plan (a BIG if at Airbus). Gallois is on the record hoping the board will approve. But then again, his chosen role is to speak with honey on his tongue. I would love to hear the coming board discussions.
Meanwhile, the company is 'rethinking' a plan to put winglets on it's A 320 single—aisle plane, by far its biggest seller. The winglets promised a 4—5% reduction in fuel burn, but technical problems and fears of weight increase. Boeing has already put winglets on its latest model 737s, the direct competitor of the 320.
The 320 is currently in a midlife crisis, as it were. Its replacement should be already planned. But will technical and financial resources be available if the company is focused on fixing the 380?
Then, there is the A 400 M military transport, an airplane planned to out—do the venerable Lockheed Hercules C 130. At least one customer/manufacturer for the plane, South Africa, is worried that it might be delayed, due to comments that its schedule is 'on the edge.' South Africa has a production deal on the A 400, to have some of its work take place locally.
So, like a dysfunctional family, the political constituents of Airbus bicker away, each worried about its own piece, and more fearful of local forces than of commercial success or failure of the totality. Which should serve as a good predictor for the future. No grand vision is likely to save the company. The drama will continue indefinitely, like the soap opera the Airbus story has become.
Thomas Lifson is the editor and publisher of American Thinker.