"Boardroom and factory feuds rage at Airbus"

Tuesday, April 3, 2007

Boardroom and factory feuds rage at Airbus
By Tim Hepher and Christian Kraemer
Reuters


PARIS/MUNICH, France (Reuters) - Airbus parent EADS faced wrangling in the
boardroom over finance and protests in its factories over job cuts on
Tuesday, hampering efforts to end a months-long crisis over jet production
delays.

As 2,500-3,000 workers staged a half-day protest over jobs in the southwest
French city of Toulouse, sources familiar with the situation disclosed that
the French government was blocking advanced plans for a bond issue to raise
restructuring cash.

The proposal caused deadlock at a board meeting on Monday, which also failed
for a second time to set a dividend for EADS investors amid sensitivities in
France over the potential impact on Airbus workers and voters ahead of
presidential elections.

EADS management has secured backing from core industrial shareholders for a
deferred equity capital increase involving a bond issue that would result
only later in the issue of new shares, three sources involved in the matter
told Reuters.

But the French government, which openly favors a share issue sooner rather
than later and has expressed a readiness to pump in cash to save Airbus,
opposed the planned method at board talks on Monday, said the sources, all
asking not to be named.

What the government wants is a "classic" share issue open to all investors,
a source familiar with the issue said.

"There were disagreements between the French state and the industrial
shareholders on this issue at Monday's board meeting," the source added,
adding there was no hurry for a capital increase in the French government's
view.

The deadlock is seen as another proxy battle over the most serious issue to
have haunted EADS employees and shareholders since its creation from a
multinational European merger in 2000, namely, the relative roles of private
industry and the state.

Co-Chairman Manfred Bischoff, who represents major German shareholder
DaimlerChrysler, blasted the French state for meddling with Airbus in Le
Monde on Monday, two days before he is expected to take over as chairman of
DaimlerChrysler itself.

With Airbus job cuts having rocked the start of campaigning for presidential
elections in late April, the conservative government has said it wants to
act quickly to bolster Airbus.

But industrialists suspect Paris of masking an agenda of maneuvering its
partners into ceding more of their shares in favor of either the state or a
new set of industrial backers.

In a secondary dispute, EADS has still not agreed a dividend for 2006, when
its profits fell sharply, the sources said.

Industry sources say DaimlerChrysler wants investors who have weathered a
prolonged crisis and share volatility at the group to receive at least some
cash return on their investment for last year, despite an 89 percent drop in
net profit.

French industrial shareholder Lagardere has also voiced support for a
dividend, while saying it would reinvest its share.

But the French government fears a dividend to investors could backfire days
before the decisive May 6 run-off vote.

Prime Minister Dominique de Villepin has called on EADS to abandon a
dividend, and conservative presidential front-runner Nicolas Sarkozy has
questioned the ethics of rewarding investors while thousands of Airbus
workers worry about their future jobs.

JOBS PROTEST

The dividend issue could make headlines in France, where Socialist candidate
Segolene Royal has attacked "easy profits," but it is the row over new funds
that is said to most severely test the power balance inside Europe's top
aerospace group.

EADS declined comment on the row, which leaves a key question over its
funding ahead of a shareholder meeting on May 4. Its shares rose almost 2
percent to 23.82 euros on signs that any funding boost would not mean a new
share issue soon.

An EADS spokesman said only that an agenda would be issued in time for the
shareholder meeting.

The French government declined comment.

Job cuts both at Airbus and telecoms equipment firm Alcatel Lucent have been
a major issue in campaigning for French presidential elections later in
April, with all parties pressing for various degrees of public support for
the jetmaker.

Tuesday's walkouts were the latest in a series of brief strikes since Airbus
announced 10,000 job cuts a month ago.

"I'm here because the plan means death for my job," assembly worker Bernard
Camuzet told Reuters. "With or without the unions, I will do everything I
can to save my company."

An Airbus spokeswoman said the walkout involved less than a quarter of
Toulouse workers, and operations were not badly hit.

Airbus is desperate to prop up finances weakened by a weak dollar, delays in
the A380 and penalties payable to angry customers.

It also wants to sell all or part of six European factories to help pay for
its next new aircraft, the 10 billion euro A350, which it needs to catch up
with a resurgent Boeing.

Cracks also started appearing, meanwhile, between unions over tactics for
opposing the "Power8" Airbus restructuring plan.

Tuesday's action was orchestrated by the Force Ouvriere union and backed by
France's two largest labor groups, the hard-left CGT and more moderate CFDT.
But white-collar union CGC and centrist CFTC refused to take part, saying it
would be "irresponsible and suicidal" to disrupt assembly lines.

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