Franco-German rivalry ‘is sinking Airbus’

By Delphine Paysant PARIS, AFP

Franco-German tension at the heart of Airbus is a destructive force for the group and is at the root of many of the problems currently afflicting the European plane manufacturer, analysts say. “The current system has no future,” industrial policy expert Elie Cohen insisted after Airbus on Wednesday announced a massive restructuring and the loss of 10,000 jobs across France, Germany, Britain and Spain. Once viewed as an example of European cooperation, Airbus today is gripped by angst over a structure that has left it dangling between the gruelling demands of private business and the political interests of its national state backers. Airbus was created in 1970 as a European industrial initiative to compete with Boeing in the strategically important airline sector, but by the 1990s weaknesses in the structure of the company had become apparent. A mishmash of public and private entities from across Europe own holdings in Airbus’s parent company EADS, a giant group which emerged in 2000 as the product of pan-European political initiative. The French state owns 15 percent and private sector media group Lagardere owns 7.5 percent, while German shareholders are represented by car maker DaimlerChrysler which owns 15 percent and a consortium of public and private interests that hold 7.5 percent. Spanish public holding company Sepi owns a firther five percent of EADS.

The French and German controlling shareholders own 22.5 percent each, ensuring a balance in the company, but executive positions are also split. EADS has two chief executives and two chairmen, with each position shared between a French and German executive. The crisis that has gripped the company for the past six months has raised deep questions about the role of the state in industry, and the place for national interests in a European single market. While the creation of a massive European aerospace company was praiseworthy, the political backing created a company-wide “conceptual error,” Cohen told AFP in an interview in Paris. The European governments, he insisted, should have quickly stepped back and let the company run itself.

“That was never the case, neither in France nor in Germany.” Jean Pierson, who headed Airbus between 1985 and 1998, agreed that the marriage between the private sector, with its shareholder-driven drive for profits, and the slow grind of subsidy-wielding state bureaucracies was unfortunate. Airbus is an “unmanageable system” cursed by a “French-German rivalry,” he told the Echos financial news daily. “From the moment you give birth to an unstable industrial entity split between (the private and public sector), you’ve got what we see here today,” he said. Cohen meanwhile claimed that the structure of the company has led to a “division of skills … that was always determined on a territorial basis, both local and political,” and “never corresponded to the best financial solution.” Christian Streiff, who served just three months as Airbus chief executive last year before quitting over tensions surrounding restructuring plans, called on the group last September to “leave behind the rationale of nationalities that preceded the creation of EADS.” Former boss Pierson meanwhile stresses that the EADS structure needed to be clarified, since the current system “cannot last.” And European Transport Commissioner Jacques Barrot criticized the “intergovernmental governance” of the company last week, saying Airbus needed to put aside questions of nationality and focus on qualifications. Not everyone agrees.

Christian Stoffaes, who chairs the French center for forecasting studies and international information CEPII, said that “the company’s double governance complicates things” but he insisted that the “bicephalous management as well as the alliance between the private and public” sectors were unavoidable. “You can’t ask the states to disengage from such a strategic sector,” he told AFP. The balance between the political, business and technical interests in Airbus is “at the origin of its success” and needs to be preserved, Jean-Louis Levet, an industrial specialist with ties to the French Socialist party, believes. Cohen however insisted the company was facing a decisive choice: either push its public backers out and wholeheartedly enter the private sector, or dismantle EADS and return to the old system of national aerospace companies cooperating separately on each individual program.