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Airbus Woes

Labor Union Accuses Airbus CEO of Obsessive Thrift

By Anne Seith

Airbus' announcement of "radical" cutbacks due to the weak dollar has angered its workers. The IG Metall labor union is accusing the manager of obsessive thrift. Meanwhile, the company's restructuring program is moving along sluggishly.

Tensions are rising, and so is the feeling of insecurity: Airbus boss Thomas Enders' fire-and-brimstone speech before union members on his company's works council on Thursday was very disappointing, IG Metal union spokesman Daniel Friedrich told SPIEGEL ONLINE. The works council wanted to hear specific details from Enders. Where would the cost-cutting be done? But they got no response.

"There were plenty of announcements," Friedrich said. "But there's a lack of good solid work." To switch into the mode of some sort of "savings activism," Friedrich argues, is the wrong way to go.

At a business meeting on Thursday, Enders painted a horrific picture of the company's future: the Airbus business model is "not sustainable as it currently stands," the euro exchange rate has "crossed the pain threshold," the tempo of the dollar's fall "hardly leaves room for reasonable adaptation." His conclusion? The situation is "life threatening." Although Airbus is looking at a record number of orders this year, the weakening US currency creates worries of "massive losses." The reason: the strong euro, which is now valued at nearly $1.50.

Airbus in particular suffers from the exchange rate: the airplanes it produces are made in the euro zone but paid for in dollars. The "Power 8" restructuring program put in place nearly a year ago is based on a euro exchange rate of $1.35. Just the same, IG Metall's Friedrich notes, this restructuring program has to be reconfigured before a new savings program is started. But that's still going sluggishly. The company leadership has not put forth any calculations that would spell out exactly how much would be saved by selling plants and outsourcing part of its production.

Regardless, Enders announced on Thursday that there is the possibility of further outsourcing: "There can be no more taboos," Enders announced. "This concerns the entire value-added chain." First and foremost the company has to curtail future capital investments. "Some product improvements currently on the drawing board," he said, "will have to be cut."

According to company sources, it is unlikely a direct reduction in personnel can lead to any significant savings. "Power 8" already stipulates the elimination of 10,000 jobs, primarily in the area of management. Due to the record number of orders, the company has been unable to move to implement the personnel cuts, Airbus says today.

Shockingly Bad Business Numbers

But obviously something has to happen at Airbus for the company to escape the crisis. Recently Airbus's mother company, EADS, published some extraordinarily bad business figures: before interest, taxes, company write-offs and special items, the company lost €343 million ($509 million) during the first nine months of the year. By contrast, the corresponding period last year resulted in an operating profit of €1.43 billion ($2.12 billion).

The numbers also reflected the additional costs for the military transporter A400M, which will come six months later than planned because of engine problems. And before that, the A380 experienced months-long delivery delays, which threw both Airbus and EADS into deep crisis. But the biggest problem at present, if one is to believe the company, is the weak dollar. The exchange-rate increase cost the company billions this year.

Airbus is not the only company that is suffering from an expensive euro. Chancellor Angela Merkel is worried about the possible consequences for the entire economy. "We're pleased that Europe has a strong currency. But that is also creating a problem for exports," Merkel told the German news channel N24. "We're working internationally to reasonably re-balance currency equilibriums."

Meanwhile, the euro is breaking one record after another. On Friday it edged closer to the crucial $1.50 mark. The German Finance Ministry's most recent monthly report said that exports had lost their position as the motor behind the country's economic recovery and upswing because in large part of the exchange-rate situation. The upward trend in exports is expected to continue, but on a slightly lower level. The growth of the gross domestic product will amount to 0.7 percent in the third quarter. The impetus behind this, however, is mostly domestic demand.

Nevertheless, the Federation of German Wholesale and Foreign Trade (BGA), cautioned against panic. "Of course the strength of the euro impairs our exports in the dollar area," BGA chief Jens Nagel told Reuters TV. But, he reminded viewers, exports to the US represent only 8 percent of all German exports. "On the contrary, we also profit from the euro appreciation: It dampens the effects of rising oil prices."

With additional reporting by Reuters.