The way EADS is managed is less unwieldy than it might have been. Considering where the company started from, it is almost logical

One of the first requirements for any newly merged company is to create an effective management and divisional structure that reflects the strengths of its existing business, the markets it intends to operate in and the talents of its senior executives. In 2000, the challenge facing EADS's leaders was to do this while satisfying the requirements of shareholders (and government ministers watching from the sidelines) for "their" national champions or favoured executives to be given prominent roles. The fact that EADS now has a largely conventional management hierarchy that is clearly delivering results is a triumph of pragmatism over parochialism.

Coming up with a logical management structure for EADS, however, was never going to be simple and there are still many legacies from the merger. For a start, the company has two chairmen and two chief executives, with a German and Frenchman in each role. There are still separate French, German and Spanish entities - little more than groupings of businesses within that country, but crucial when it comes to protecting proprietary defence technology and ensuring each country's industry gets a fair workshare from key projects such as the A380. There are head offices in Paris and Munich - although EADS is legally registered in neutral Amsterdam - but most central functions, such as marketing, public relations, legal affairs, finance, sourcing and communications, are concentrated in one of the head offices rather than duplicated.

Part-shares

Complicating matters further is the fact that EADS ranks among its units a number of businesses in which it only has a part-share, although all but Eurofighter are now integrated companies rather than consortia. The biggest, of course, is Airbus (20% owned by BAE Systems), a division of EADS in its own right. Next comes missile house MBDA (EADS has a 37.5% share, alongside BAE Systems' 37.5% and Finmeccanica's 25%), which comes under EADS's Defence & Security Systems division. EADS and Finmeccanica each have a 50% share in regional aircraft manufacturer ATR, part of the Aeronautics division, while - in the military aircraft unit of Defence and Security Systems - EADS has 46% of the Eurofighter programme alongside BAE and Finmeccanica. The company also has a 46% stake - but no management control - in French aircraft manufacturer Dassault.

EADS is overseen by a board of directors appointed by its shareholders, with DaimlerChrysler board director Manfred Bischoff and Lagardère chief executive Arnaud Lagardère as joint chairmen. Lagardère succeeded to the post in 2003 on the death of his father, Jean-Luc, one of the main drivers of EADS integration. Under them, and in day-to-day charge of the company, are two chief executives, Philippe Camus and Rainer Hertrich. Before the merger, Camus and Hertrich ran the two main founding companies of EADS, Aerospatiale Matra and DaimlerChrysler Aerospace, respectively.

They head an executive committee that comprises the heads of four of EADS's five divisions - Airbus (Noel Forgeard), Military Transport Aircraft (Francisco Fernandez Sainz), Space (Francois Auque), and Defence & Security Systems (Tom Enders). The Aeronautics division has been headed by Hertrich himself since the retirement of its previous chief Dietrich Russell earlier this year while, uniquely, Airbus's chief operating officer Gustav Humbert also sits on the executive committee.

Functional heads

In addition, the executive committee includes four "functional" heads: Hans-Peter Ring (finance), Jean-Louis Gergorin (strategic co-ordination), Jean-Paul Gut (marketing and international) and Jussi Itavuori (human resources). Ralph Crosby, chief executive of EADS's North American operations, also sits on the committee.

The nationalities making up the executive committee - five French, four Germans and a Spaniard (together with an American and a Finn) - reflects the ownership of EADS and the delicate balancing act that had to take place to ensure each "constituency" was happy. A huge factor in convincing both public and politicians in France and Germany that the merger was a good idea was ensuring none of them thought the "family silver" was being sold over the Rhine.

One of the biggest debates among EADS watchers is the "succession question": who takes over as, presumably, the single chief executive of EADS when Camus and Hertrich move on.

Succession assured

This is not a pressing issue - Hertrich is 54 and Camus two years older - but one that many see as marking EADS's progression to a conventional aerospace corporation, with one chairman and chief executive and senior executives appointed solely on their ability to do the job rather than their nationality. Although he admits the two chief executives situation is a result of EADS's unconventional beginnings, Hertrich says it has been "part of EADS's success factor". Away from Airbus, a large part of EADS's business involves selling to governments and for this, says Hertrich, it is usually necessary, whenever possible, to have a "national face".

There is no shortage of able senior executives in their late 30s to mid-40s in EADS's ranks, likely to be contenders for the top job when it comes. One of the favourites is Tom Enders, 46, who was last year handed the reins of a beefed-up Defence & Security Systems division. Other possible heirs-apparent include 38-year-old Marwan Lahoud, chief executive of MBDA and formerly senior vice-president for mergers and acquisitions at EADS; Fabrice Brègier, 43, whom Lahoud replaced at MBDA and who is now president and chief executive of Eurocopter; and Stefan Zoller, 46, chief executive of the Defence and Communications Systems business unit in Munich. Francois Auque's CV includes turning around EADS's ailing space business, while head of EADS International Jean-Paul Gut has led the company's global expansion.

Those who see EADS moving to a more merit-driven system of promotion - with high-flyers given the opportunity to broaden their experience within the different businesses - point to a recent succession of senior management moves which, in addition to new jobs for Lahoud and Brègier, saw Aloysius Rauen become chief executive of Eurofighter, with Johann Heitzmann replacing him as head of EADS military aircraft and Bernhard Gerwert takings Heitzmann's job as head of defence electronics.

MURDO MORRISON / PARIS

 

Source: Flight International