Airbus will spell out its controversial Power8 restructuring plan on Wednesday after meeting labour leaders, the troubled planemaker said on Tuesday. Hurt by the costly delay of its A380 superjumbo and a weak dollar, Airbus needs to lower costs and strengthen its finances to remain competitive with surging US archrival Boeing Co.
Parent firm EADS announced late on Monday that its board of directors had "fully supported the EADS and Airbus management in realising the plan". It is expected to trigger job losses and possible factory sales in France and Germany, with jobs in Spain and Britain also at risk.
"Mr Gallois will hold a news conference after the meeting with the European works council in Toulouse," an Airbus spokesman said, referring to Louis Gallois, who is co-chief executive of EADS and CEO of Airbus. Power8, first announced last October, calls for annual cost savings of at least 2 billion euros ($2.64 billion) from 2010, 5 billion euros in cash savings by then, and faster product development.
Wednesday's announcement is expected to spell out how it achieves all of that, though industry officials and analysts say questions will remain. Last week, French Prime Minister Dominique de Villepin said Airbus would cut 10,000 jobs, though many of those are thought to involve work at supplier firms.
With French elections only weeks away, some observers argue that the Franco-German company may announce a lower figure to placate politicians and unions, including German ones. The plan has sparked political debate between France and Germany, which is where the bulk of Airbus's plants are based and home to EADS's top shareholders.
Brokerage Natexis Bleichroeder said it was sticking to a "hold" rating on EADS shares and a target price of 23 euros, noting Airbus might still have to raise cash from the capital markets. "Setting up the Power8 restructuring plan still carries execution risks, as is the case with Airbus's financing needs which could stand at least 3.5 billion euros ($4.61 billion) according to our initial calculations," it said in a research note. A key execution risk is strong political and union opposition facing Airbus as it looks to cut thousands of jobs.
PLANT SALES: Plant sales could also take longer than expected. UK firm GKN Plc supplies Airbus and has been mooted in brokerage analyst reports as one of several possible bidders for Airbus plants, with private equity firms also expected to take an interest.
GKN Chief Executive Kevin Smith told reporters on Tuesday: "We will see what opportunities we may get on the structure side once Airbus have decided on the industrial structure." "We are interested in working on the A350 programme," Smith said regarding the next new Airbus model.
Wrangling over where Airbus places work on the A350 has been blamed for delaying Power8, as German and French factions in particular covet key technologies such as carbon fibre composites. Like Boeing's next plane, the 787 due in 2008, the A350 is expected to use far more lightweight composites in its wings and fuselage.
That change in materials has shed doubt on whether some of the established Airbus factories for such work using aluminium will get fresh contracts. EADS and Airbus have been forced to draft Power8 largely because of a two-year delay in the double-decker A380 superjumbo, which was blamed on problems encountered wiring the mammoth planes to customers' individual requirements.
A380 sales have slowed, airlines have demanded compensation for late delivery, and Airbus has incurred cost overruns trying to resolve the problem. With planes sold in dollars and much of its cost base in euros, a 35-percent weakening of the US dollar since Airbus made its first cost and profit projections on the A380 has also hurt the company.
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