Analysis: Airbus Begins Stealthy Return to Better Times
(Source: defense-aerospace.com; issued Dec. 27, 2007)

By Giovanni de Briganti
PARIS --- Earlier this year, we noted in a column that the original organisation of Airbus was better suited to the company than the supra-national structure adopted in 2000 at the behest of catastrophic former CEO Noël Forgeard, and suggested that reverting to it would go a long way towards solving the company’s ills.

The problems in which Airbus has found itself embroiled since 2005-2006 are due, to a large extent, to central management’s failure to adequately supervise factories owned and operated by Airbus Germany, its wholly-owned but, in fact, autonomous subsidiary.

Reverting to the pre-2000 industrial organization, we argued, would make national partners directly responsible, and accountable, for the performance of their national subsidiaries. It would avoid idealistic cross-border industrial integration, which is doomed to remain a pipe dream as long as Airbus trades unions, minority partners and employees remain firmly entrenched in their national identities.

But it would have been both impractical and politically unacceptable to simply revert to the previous organization, in which a central Airbus entity based in Toulouse designed and sold the aircraft, but farmed out production work to Aerospatiale, British Aerospace, DASA and other companies which actually owned the factories, and billed Airbus for the work they did, like any other subcontractor.

First of all, this would have been seen as an admission of a failure of gigantic proportions, but that had nonetheless been approved by governments, politicians, top managers and trades unions. All would have wound up with egg on their face, which is obviously politically unacceptable, however deserved.

Secondly, it would have sent the wrong signal to customers, subcontractors and partners, as it would have demonstrated to the world that Airbus had been led down the garden path by irresponsible managers without any reaction from stakeholders.

So, while the solution was readily apparent, its implementation looked well-nigh impossible.

This is where Louis Gallois’ decision to sell off several factories in France and Germany is politically and industrially brilliant. Airbus said Dec. 19 that it will sell seven factories: Filton in the U.K.; Meaulte and St Nazaire Ville in France; and Nordenham, Varel and Augsburg in Germany, with a fourth German plant (Laupheim) also up for sale. The fact that Airbus will retain a minority stakes during a three-year transition period changes nothing, as it “does not intend to interfere in the majority shareholder’s management of each plant.”

This sell-off seems innocuous, but to all intents and purposes it means that Airbus is now on course to revert to its old organization: the only difference is that, instead of being called Aerospatiale, British Aerospace and DASA, its national subcontractors are now called Latécoère, GKN and MT Aerospace.

As before, these national partners will be assigned work by Airbus, and they will have to produce to Airbus’ price, quality criteria and schedule or they won’t be paid. As before, Airbus won’t get involved in the details of running the sites, which each national partner will solve as it thinks best, according to its national business environment, rules and traditions.

Thus, restructuring of German factories will be left to the German government, to German shareholders and to German unions, while the British and the French will take care of their own factories. No more cross-border disputes, no more talk of “spreading pain” equally across the entire Airbus company: simply national problems to be solved nationally.

And national problems will not pollute Airbus factories in other countries, either, because they will no longer be Airbus factories. In fact, having national partners that no longer carry its name will also isolate Airbus from any future strife as they reorganize, lay off staff, and - maybe - post financial losses.

All these changes, it is worth noting, are happening without a dissenting peep from stakeholders apart from some routine rumbling from the unions, and certainly without the publicity blaze that accompanied the transition to the trans-national Airbus in 2000, nor the public storm that embroiled the company in 2005 and 2006.

What Gallois and Enders have achieved by unobtrusively turning the industrial clock back is as neat an industrial rescue operation as has been seen in living memory. They deserve a medal for thinking it up and pushing it through, and will probably get one if they manage to bring it to fruition.

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