Airbus Chief Shows Military Mettle For Battles Ahead
(Source: Financial Times; published March 02, 2017)
By Peggy Hollinger
Having served as an officer in the German reserve army, Tom Enders understands tactics. So, when the chief executive of Airbus says his company risks racking up “billions” in extra costs on a troubled military aircraft programme unless its customers agree to cap penalties for delays, Mr Enders knows he is balancing shareholder confidence against a hard negotiating position.

“There is a huge financial Damocles’ sword hanging over us in terms of these damages,” Mr Enders says in a wide-ranging interview with the Financial Times. In the worst-case scenario, these could amount to “very serious money, and we’re talking here potentially about billions”, he says.

Bringing the transport aircraft programme’s customers back to the bargaining table is only one of the many challenges testing the mettle of the former paratrooper. Regulators are investigating allegations of bribery, fraud and corruption in the company’s civil aircraft and defence businesses, while looming job losses and a restructuring that aims to break down long-established Franco-German fiefdoms are fomenting discontent.

The A400M is perhaps Mr Enders’ most immediate challenge, after problems with the gearbox last year grounded most of the fleet and left Airbus nursing a €2.2bn hit to 2016 profits.

Despite receiving a €3.5bn bail out from the programme’s six government partners in 2010, Mr Enders is adamant that new concessions must be made if the project is to succeed.

Although he refused to quantify the penalties for fresh delays racked up since the 2010 agreement, a person close to the situation estimated these at close to €1bn. Airbus, which generates 60 per cent of earnings from the sale of commercial aircraft, can ill-afford this drain on cash as it ramps up production of civil aircraft to record rates.

“We cannot force customers [to renegotiate], but they also cannot force us to indefinitely carry such significant financial risk and burden,” Mr Enders says. (end of excerpt)

Click here for the full story, on the FT website.


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