EADS Reorganization: Too Little, Too Soon?

Damned if you do, damned if you don’t

• Giovanni de Briganti argues that EADS’ 5,800 job cuts look like a red rag to a bull to the French and German governments since the company has a strong balance sheet, a huge backlog, and is creating jobs in Poland. Germany will face more cuts as it hosts the vast majority of defense-related jobs, but pushback will be strongest in France, where Minister of Labor Michel Sapin said [in French] that EADS’ announcement was “scandalous” and that the company had a “duty” to avoid redundancies. These are not the words of a lightweight underling: labor is one of the most prominent ministries in French cabinets, and Sapin first met President Hollande while they trained together as reserve Army officers 4 decades ago. And the French government remains a shareholder of the company, even if its influence and the size of its holdings have both diminished.

• However, Briganti also notes that an internal memo leaked [in French] to the Challenges monthly magazine showed that the defense book-to-bill ratio at EADS is expected to slide to 0.8 by 2018, i.e. by then they’d replace each dollar of past sales with only 80 cents of new bookings. In that light the consolidation of very different product ranges under one umbrella may not be enough to solve Airbus Military’s issues.

• In the ramp up to cutting jobs at EADS, Tom Enders had made it clear that cuts in German military orders would have consequences. The US Senate is worrying – but not doing much else – about the future of the industrial base dedicated to manufacturing military helicopters, given the Pentagon’s declining and highly uncertain acquisition pipeline.