Last Wednesday was a mild, almost spring-like day in Toulouse in southern France -- a seemingly perfect day for flying. Around 200 guests came to Airbus' new delivery center, a glass cathedral with lounges and bars, to marvel at a jumbo jet that was once meant to show off Europe's strength in innovation: the A380.
But the test plane with the serial number 007 encountered strong sidewinds after taking off towards the Pyrenees shortly past noon. And as soon as the pilot had turned off the seatbelts sign dreary reality quickly caught up with the Airbus managers.
A crowd gathered around seat 70H. A passenger named Jürgen Thomas, who turns 70 this year, is considered the father of the A380. But instead of being able to enjoy a flight in his jumbo-sized baby, the former A380 developer and current Airbus consultant had to answer uncomfortable questions about delays and production problems. Instead of being its salvation, the A380 has become a symbol of the crisis affecting the European aerospace industry.
The €12-billion ($15.6 billion) project is becoming a disaster for both Airbus and its parent company EADS. Technical problems have delayed the delivery of the superjumbo, so that Airbus has to pay out compensation to airlines instead of pocketing profits. And there isn't any money for desperately needed reinvestment in the company, which will book a loss for the first time in 2006.
Now a restructuring program called "Power 8" is supposed to cut costs from 2010 by around €2 billion annually. But before the details have even been worked out it's becoming clear that some six years after EADS was founded it's far from being a European company. Instead it's a collection of competing national interests with the Spanish, French and Germans locked in a no-holds-barred dust-up.
Preferential treatment for France?
A French trade union recently released a study supposedly showing that the factories of the Grande Nation were much more efficient than those in Germany. Since then, international labor solidarity at the seven German production sites has quickly disappeared. The German workers are now warning the company's management not to give preferential treatment to the French plants.
German Chancellor Angela Merkel plans to lobby for the plants in Germany when she meets Airbus boss Louis Gallois on Tuesday. It will be a tough sell, since the problems plaguing the A380 have only exposed the company's fundamental weaknesses.
The French have long sought to take command of the company and are likely to see the restructuring as an opportunity to strengthen their position. The Germans have largely failed to keep pace with the development of new technologies, endangering the future of their factories in the process.
And both sides have failed to set up production facilities in the United States, which would partially shield Airbus from the fluctuating dollar exchange rate. The greenback's slide cost the company around €800 million last year alone.
This mixture of national self-interest and jealousies, management mistakes and political quirks make the crisis particularly dangerous. There are no simple solutions. And any restructuring plan is measured by just how evenly it spreads the pain among the different countries.
EADS executives Louis Gallois and Thomas Enders are battling it out in the boardroom as the respective champions for France and Germany. Gallois, a quiet manager, appears to have the advantage. He's also the head of EADS subsidiary Airbus. But he has one problem: France is heading towards elections. The last thing the government in Paris wants right now is job cuts and plant closures in the prestigious aerospace sector.
But Enders is fighting that with all his might. He's convinced the company can't just focus on its current problems and it needs to be completely overhauled to make it competitive over the long term. That's why the German is warning against making lazy compromises: "We can't just implement a new restructuring plan again next year."
The two EADS execs are still grapping with the current restructuring plan. It's not even clear if it can be presented on Feb. 20 since important key points still haven't been decided.
Around 10,000 jobs are to be cut in Europe, mostly part-time and temporary positions in administration. Both Gallois and Enders hope to avoid lay-offs if at all possible. The plants are running at capacity and a labor dispute with workers' councils or even a strike at a single factory could paralyze the entire Airbus production.
The restructuring plan aims to sell off plants to investors in both France and Germany. Presently, Airbus develops and produces almost all of its important plane parts internally, requiring high levels of investment. If facilities such as Varel and Nordenham on Germany's North Sea coast could be sold off, the new owner would be responsible for coming up with that money, but in return would receive long-term contracts with Airbus. Potential buyers, including some from Russia, are said to have already expressed an interest in specific Airbus plants.
Germany concerned about influence
The third focus of the restructuring program is a new division of production between the various Airbus facilities. Fears in Germany that A380 production could be moved entirely to Toulouse are unlikely to be realized. However, the final assembly of the new long-range jet the A350 will probably not be divvied up between Toulouse and Hamburg, as happened with the political compromise for the A380.
According to the plans by Gallois and Enders, the smaller A350 will be built in France. In return, the Germans could get the assembly for the next generation of the even smaller A320 family of planes, which are expected to go on sale in 2013.
The head of the Airbus workers' council in Hamburg, Horst Niehus, has already begun to protest against letting the bigger and more technologically advanced jets be built in France while Germany is forced to concentrate on short and medium-range planes. Workers' representatives in Germany are already concerned that the French are now hoping to gain control of the company. They've calculated that around 50 percent of the 53,000 Airbus employees currently have a French boss. After the restructuring that could jump to 63 percent. The number of workers under a German manager would sink from 31 to 15 percent.
It says a lot about the state of Airbus that such calculations are even being made within a jointly run European company. Even Niehus is made a little uncomfortable by the figures, but he's afraid that when push comes to shove, French bosses will choose French plants.
If the A350 is assembled entirely in France, the production sites in Germany could be cut off from new technologies. Workers' councils fear that much of what is now done in their factories could then shift to Spain, Britain or France. That could mean the tail for the A350 is built in Illescas south of Madrid instead of Stade near Hamburg and the wings would come from Filton or Broughton in Britain instead of Bremen. Hamburg could also be forced to relinquish the development of the A350 cabin to Toulouse.
Moving toward carbon-fiber composite
Although that might not sound particularly dramatic, it could end up endangering the long-term development of Germany's aerospace industry.
The A350 will be the company's first plane built mostly with carbon-fiber composite technology, which makes jets lighter, saves fuel and will eventually replace aluminum and metal composites. But aside from the plant in Stade, Germany's Airbus sites are not prepared for the move to the new technology.
For the next few years they will be busy with the current production models. But if the plants in Hamburg, Bremen, Nordenham and Varel don't undergo a costly equipment changeover they will don't have much of a shot at securing contracts for new models, such as the A320 successor, since those planes will also be mostly built with superlight materials.
When EADS was formed in 2000 major shareholder DaimlerChrysler imposed the painful "Dolores" restructuring plan on German plants -- now the consequences are being felt. Some 8,000 jobs were axed, many of them in the development department. The German government also had little interest in backing the sector, offering only minimal funding for aerospace research and development.
In contrast, the French bolstered their expertise in those fields. And the Spanish partners made sure their plants were converted to the new carbon-fiber technology early on -- with subsidies from the European Union. In doing so they've secured their future: Spain is likely to emerge largely unscathed from the latest restructuring program.
The governor of the German state of Lower Saxony, Christian Wulff, is committed to expanding the carbon-fiber center at Stade. As in Bavaria's Martinsried Genetics Research Center, researchers from industry and the scientific community would come together to develop new technologies. Converting production sites to carbon-fiber composite technology is the only hope for northern Germany's Airbus facilities. But that won't be enough if planes are only equipped and assembled in the country. If Germany doesn't want to be consigned over the long term to the role of Airbus sub-contractor, it will have to play a bigger part in developing new jets as well.
Dwindling private investment
State politicians from EADS locations in Hamburg, Bremen, Lower Saxony, Baden-Württemberg and Bavaria are alarmed. Together they hope to prevent Germany's influence on Airbus from dwindling when DaimlerChrysler sells its 7.5 percent stake in EADS, as planned. The politicians want to purchase the stock with several banks.
But EADS management isn't excited by the prospect of having regional politicians buying into the company. They believe the company would best be able to compete with US rival Boeing if politicians -- both in Paris and Berlin -- kept out of the company's decision-making process.
However, just the opposite is now likely to happen. Private shareholders in EADS, DaimlerChrysler and the French media entrepeneur Arnaud Lagardère, have already decreased their stakes and want to sell even more of their stock. At the same time, the French government and Germany's states are both pushing for more influence.
In the future EADS managers might not just have to be careful to spread restructuring costs evenly between the countries. Soon the regional governments of Bremen, Hamburg, Lower Saxony, Baden-Württemberg and Bavaria could be demanding that job cuts are evenly spread amongst German plants at Laupheim and Nordenham or Varel and Hamburg.
But political pressure alone will not secure aerospace jobs over the long term. At least not when applied as clumsily as by Germany's Economy Minister Michael Glos, who recently threatened to deny EADS defense contracts if Airbus made too many cuts at its German facilities. Apparently nobody told the minister that doing so would actually endanger thousands of other jobs in Germany. Both the Eurofighter jets and NH90 attack helicopters being built for the German armed forces ensure that several local plants are working at capacity -- especially in Glos's home state of Bavaria.