Airbus to Cut 10,000 Jobs, Take EU680 Million Charge

From Bloomberg.com

Airbus SAS, the world's biggest commercial-plane maker, will cut 10,000 jobs over four years and sell or find partners for six factories in an attempt to end a financial crisis sparked by delays in the A380 superjumbo jet.

The company will slash 2.1 billion euros ($2.8 billion US) from annual cost by 2010, Airbus Chief Executive Officer Louis Gallois said on Wednesday, February 28, 2007, at Airbus headquarters in Toulouse, France. The company will take a 680 million-euro charge in the first quarter to pay for the job cuts, which represent 18 percent of the workforce.

European Aeronautic, Defence & Space Co., the owner of Airbus, expects to report losses of 4.8 billion euros through 2010 because of delays of at least two years on the 555-seat A380. Airbus needs the savings to pay for development of a new widebody plane to challenge Boeing Co.'s 787 Dreamliner, which may help the Chicago-based planemaker regain the lead in the aircraft industry.

"This finally brings EADS towards market reality," said Christopher Dabrowski, a senior defense analyst at Frost & Sullivan in London, who advises companies in aerospace.

Shares of EADS rose as much as 61 cents, or 2.4 percent, to 26.06 euros, and were up 1.7 percent at 4:59 p.m. in Paris. The stock has fallen 16 percent over the last 12 months while Boeing has gained 21 percent as the U.S. planemaker won more orders for new planes than its European rival.

"We should have done this many years ago at the time when we created Airbus," said Gallois, referring to the creation of the planemaker as a single company in 2000. "Boeing was in difficulties then, the dollar was strong, and we were selling airplanes like bread."

The reorganization, known as Power8, comes as Airbus is set to report its first-ever annual loss after costs for the A380 ballooned to $18 billion from $12 billion. The European planemaker also plans to spend 11.8 billion euros to develop the A350 XWB to challenge the Boeing 787.

The company also is burdened by the decline of the dollar against the euro. Aircraft sales are priced in dollars while about half of Airbus's costs are in euros. The dollar has lost 40 percent of its value against the euro since December 2000, when Airbus committed to building the A380.

Airbus currently has 56,400 employees spread over 17 sites France, Germany the U.K. and Spain. The plan will cut 3,200 factory jobs in France from a staff of 17,600. They will also cut 1,100 jobs from Airbus's headquarters in Toulouse, which now employs 4,700 people from France, Germany, U.K. Spain and elsewhere in the world. In Germany Airbus will cut 3,700 jobs from a total of 20,800. Spain will see 400 jobs go, and Britain 1,600.

Airbus also said it plans to seek partners for three plants as those sites move from building parts from aluminum and other metals to working in composite materials. Those plants are Filton in the U.K., Meaulte in northern France and Nordenham in Germany. The company is looking to sell three plants, including Laupheim and Varel in Germany and St. Nazaire-Ville in France.

Airbus's moves are aimed at helping it prepare for a future when metals such as aluminum and steel are increasingly replaced by composites, or carbon-fiber reinforced plastics.

"The future of airplanes is plastic, not aluminum," said Nick Cunningham, an analyst at Panmure Gordon in London who has a "sell" recommendation on EADS shares.

Airbus's planned A350 XWB, scheduled to enter service in 2013, will be about 50 percent from composite materials, as compared with 25 percent for the A380, now under production.

Airbus employees are likely to fight changes, as the benefits that go with Airbus jobs may be more generous than those at subcontractors, said Xavier Petrachi, who represents French Airbus workers in the left-wing CGT union.

"When you're hired at Airbus, it's not the same thing as being hired elsewhere," said Petrachi in an interview. "It's not the same salary, not the same statute, not the same working conditions." IG Metall, the German union representing Airbus workers, has threatened a slowdown that would prevent the company from meeting its delivery target of 440 planes this year. Force Ouvriere, the largest Airbus union in France, threatened similar measures.

European Metalworkers' Federation General Secretary Peter Scherrer said yesterday at a briefing in Brussels that the workers will not accept job cuts without a fight.

Workers at the Varel and Nordenham factories in Germany walked off production lines at 4 p.m. to protest the company's plan, Michael Scrod, an IG Metall official in Hamburg, said.

Boeing, which lost the lead to Airbus in commercial aircraft in 2003, has bounced back with the introduction of the 787, beating Airbus in new orders in 2006 for the first time in five years. Boeing's 787 has won 452 orders so far compared with 100 for Airbus's A350.

The U.S. planemaker received total orders for 1,004 aircraft last year compared with 790 for Airbus. The European company maintained its delivery lead 434 planes to 395.