Andrew Doyle/AMSTERDAM
European Aeronautic, Defense and Space (EADS) is to tackle problems presented by its formation from Aerospatiale Matra, DaimlerChrysler Aerospace (Dasa) and CASA by devolving power to the lowest level in an apparent bid to head off potential clashes along national lines.
The structural blueprint for EADS, unveiled by co-chief executives Philippe Camus and Rainer Hertrich, features Airbus Industrie chief executive Noel Forgeard who also becomes head of its Airbus division, confirming a move that has angered the Airbus consortium's other member, BAE Systems. The pair say EADS - set to become the world's third-largest aerospace company - will be floated at the end of June.
The structure of the new company is to be based on the principle of "subsidiarity", or the delegation of decision-making powers to the lowest possible hierarchical level. This is a potentially risky approach that has failed to deliver in some previous mergers, but the strategy is designed to minimise friction where decisions affecting national sensitivities have to be made.
EADS is to be established as a Dutch-registered company at the end of June, when just over one-third of shares, worth around €5 billion ($4.9 billion), will be floated on the Paris and Frankfurt bourses. The timetable may slip if European Union competition authorities opt to probe the tie-up. A decision is expected within weeks.
Among senior management appointees named so far are 25 French nationals, 23 Germans and four Spaniards. EADS executives claim positions have gone to the best-qualified candidates, although they concede that "every nation should be fairly represented". The EADS structure duplicates functions only where this is necessary to satisfy "national interest, vis-a-vis customers and politicians", say the merger partners. Business units will each bear "full responsibility" for their performances.
Details of the synergies the merger might achieve are sketchy, although Hertrich lists purchasing, headquarter functions and engineering and technology research as areas of opportunity. He admits that savings in areas including manufacturing will be dependent on freezing costs while the aerospace market expands.
The confirmation of Forgeard as head of EADS Airbus, which will control 80% of the airframer, seems to put the new company on collision course with BAE, which believes his appointment will present a conflict of interest.
The UK giant has yet to complete negotiations with its fellow shareholders over the restructuring of Airbus into a single company, although Hertrich says talks are ongoing. His preferred solution is to establish it as a standalone Dutch company, and though he says "other alternatives" are being examined, he rules out the possibility of BAE increasing its stake beyond 20%, saying a one-off compensatory payment could be made should the values of the partners' Airbus assets make it necessary.
EADS insists that failure to agree on the Airbus restructuring will not delay its flotation, but whether investors will be comfortable with such a scenario remains to be seen.
The EADS structure helps clarify the position of Dassault Aviation, 46%-owned by Aerospatiale Matra. Dassault, which offers the Rafale in competition with Eurofighter, part-owned by Dasa and CASA, will be under the auspices of strategic co-ordination executive Jean-Luis Gergorin, but outside the EADS Aeronautics unit.
"We did that to have a clear Chinese wall between the management of Eurofighter within the military aircraft division and our participation in Dassault, which have to be separated," says Camus. "We intend to stay as a shareholder in Dassault and shall explore all the options relating to this participation."
EADS will incorporate Aerospatiale Matra's interest in Europe's planned single missiles business within its Defence and Civil Systems division, but the future of Dasa subsidiary LFK, which could be brought into the merged missiles concern, is unclear. "We have several options but have not decided what to do," says Camus.
Source: Flight International