« Sueddeutsche: Bush Resorts to Unilateralism to Save Flipper | Main | World Cup: Lackluster Play, Poor Officiating Down USA »

Comments

just read about it in WirtschaftsWoche
Maybe some are wondering about it (that it didn't work)
I don't, one could anticipate it

Why? Because the state is a lot involved in it (at least 20%). Here are the owners of EADS:

22.3% Daimler-Chrysler
15.0% France (the state)
12.7% Lagardere (french concern)
5.4 % Sepi (spanish state firm)
2.2 % CDC (french state bank)
42.4% different owners

They postponed the delivery of 380 with 7 month (but I expect it to take longer than that) and then they want to change the 350 from ground up, so that it will be delivered no sooner than 2012. The customers cannot wait so long; some want to switch to Boeing (Emirates, Singapore Airlines)

Beside, Airbus bet on the big 380, Boeing on the smaller 787. But this is up to the market to decide, who is right about it.


I think there are similarities with Volkswagen, another company where the state owns about 20%.
They also have a lot of trouble with their products...

Guilty for the Airbus debacle are the Americans, more exactly, Boeing.

It is Boeing, through their cruel capitalist tactics, who has instilled into the minds of buyers the concept that deliveries will be made in time. What those (stupid) buyers don't understand is that Boeing is just an airplane vendor, while Airbus is a pioneer, Airbus creates visions for the future. Visions follow a different time plan, certainly not the one created by greedy Americans and Boeing.

Just like other EU visions (notably the Lisbon agenda, which says that by 2001 EU will be "the world's most dynamic and competitive economy" - ROTFL) this vision has difficulties dealing with reality. The A380 will not die, the governments will make sure of that and pump more money into it. After all, EU's "prestige" is at stake. The question is: where will the competition be by the time they are finished? Maybe flying around the Earth in their personal space shuttle :-)

I would hate to be a stockholder in Daimler-Chrysler right now. Ah, rats! I am, as well as having ADRs in EADS. Does that mean that the citizens of Germany, France, Spain et al., are going to reinflate my stock value? What's missing from this whole episode is any concern for the stockholders and what the consequences of a near Boeing monopoly will have in the future? Plus what the heck were the German political appointees doing when this debacle was gaining a full head of steam?

And while the order books at EADS for the A380 are shrinking, the liability contingencies incrasing, the orders for the much derided (by the EADS) Boeing 787 Dreamliner are climbing faster than the A380's maiden flight.
No wonder they are mad at us. They belitteled Boeing for not seeing the market, and now they can't even deliver the technology. Nobody likes eating crowe, and damning America if far easier than admitting failure.

This is a terrific scandal. It has everything: economic, political, and nationalistic aspects. Even mathematics enters: Airbus + Parmalat = Enron.

I wonder how long the French co-chair will last? Will France fight to keep him in place? After all, he is well-connected politically.

You mean bribery, government bailouts and kickbacks don't make a better plane and better company than capitalism?

It's my first, but i can't resist:
supermumbojumbo

OK, first the usual disclaimers: Although I speak here for no one other than myself, in the interest of full disclosure, I will point out that I work for the competition. Etc...

Back when the production plan for the A380 was first announced, I was stunned by the schedule. I remember thinking at the time that it was a horribly "success-oriented" schedule -- they were simply thinking that everything would go according to plan. There was no management reserve, no places to pause and assess the situation, no maneuvering room to recover from problems. On a project this large and complex, you always have to figure that some things will not go according to plan. It wasn't a smart way to schedule the program. And then they boxed themselves in further in terms of customer expectations by flying the prototype early, and then taking orders on the assumption that the production line would ramp up from nothing to full capacity in the first year.

But the thing is, if the actual production issues were the extent of the problems, the situation would be recoverable -- not good, but not terrible either. Boeing has faced worse issues in the recent past, such as the late-1990s production problems, but they kept working at it and eventually they recovered. It's not like Airbus doesn't have smart engineers. I expect that if they were just left to solve the technical problems, they would eventually work through it. Losses would be incurred, but nothing like the numbers I've been hearing.

No, the problem is: Airbus has grown accustomed to living off the state treasury, and the state is used to have Airbus as its playground. It's a mutually destructive relationship. Airbus made a huge, high-risk bet when it decided to produce the A380; Boeing had marketing studies in hand showing that there wasn't a market for a plane that large, which is why they decided not to produce the mega-747 that would have competed directly with the A380. Airbus grew complacent with the idea that they couldn't lose; the EU handed them launch aid and "forgivable" loans, so that EADS assumed little of the risk. Under those circumstances, why not design a big play-toy? What have you got to lose?

Of course, what Airbus lost was their forward vision. They took their eye off the ball, and while they were looking the other way, Boeing quitely designed the 787 out of a whole heap of advanced technologies that they had been experimenting with for years. And they did so in consultation with their customers. Airbus had grown too used to the idea that their customers would buy whatever they produced. The airlines love the 787. Airbus tried to respond with a warmed-over version of the A330. That went nowhere, but Airbus ignored for a year the fact that it wasn't selling. Now, in order to avoid just giving up this market segment, they have to totally redesign the A350. And where is the money to do that going to come from? The EU governments, of course! Hey, why break a bad habit? (Or, as Lloyd Bridges said in "Airplane": "I knew I picked a bad week to stop sniffing glue!") But that's what you do when you have the luxury of not having to assume any business risk. You assume that anything you screw up, someone else will clean up. You assume that if your project falls behind and causes the company to lose money, you can just get more. You assume that you don't need to keep an eye on the competition because if you get surprised, you can always get more money to catch up.

But now the devil is owed his due. In a statist society, you can live off of state money only as long as you don't embarass the state. The French and EU governments have been embarassed. (And the EADS stockholders stand to lose a bundle of money, but that's not what is important. What is important is that high-level politicians have been embarassed.) Which means that EADS' already-convoluted management structure is going to get even screwier. Of course, none of this will actually fix anything. It will just make EADS' management even less transparent to the stockholder, while giving the government groups (notably the French government) more hidden levers that they can pull to suit their own interests.

It's no wonder that BAE Systems wants out of this mess. They didn't drink that Kool-Aid. They are in the U.S. military market big time, and they don't want any part of doing business the "European way". So, on top of everything else, EADS now has to come up with billions to buy out BAE's share of Airbus. But what the hey... there's always government aid! It's becoming clear to me that, for a long time now, EADS and Airbus have been coasting on the success of the original A300, which was a good plane for its time. Ever since then, from the override-the-pilot software on the A320, to the A340 which failed to anticipate engine improvments and ETOPS rules, to the A380 which still faces an uncertain market (although I think it has a bright future as a cargo plane), to the design-of-the-week A350, Airbus has been operating like an old-line European national champion. Some things never change, do they?

And a P.S.: I think that one thing that has blinded European eyes to the A380 situation is that it fits their pre-conceived notion of how things should be done in a statist society. The purpose of the A380 is to take a large collective mass of people from point A to point B. That's the very essence of mass transit. But what if some people aren't coming from point A, or don't want to go to point B? Doesn't matter; they still have to be funneled through A and B because, well, that's what statist societies do. People should be concentrated; it makes them easier to control. The de-centralized model of aviation that Boeing's airplanes are meant to support is, in European eyes, not just unworkable but evil.

Umm...is everyone forgetting that two years ago, Airbus grabbed the position of the top commercial airliner manufacturer away from Boeing. I guess so.

Boeings tactic appears to be to dress up their old product in a new costume(tutu), and call it a new aircraft.

and @CousinDave: By pursuing Airbus, Boeing could put its pipeline of government research funding at risk, and supports such as a $3.2 billion tax break from Washington state almost certainly will be examined. The EU claims Boeing since 1992 has fed on $23 billion in government handouts, mostly NASA and Defense Department research grants. Talk about sniffing glue, I think anytime now would be a good time for you to stop, Dave-O.

@Delphino-Could you name one manufacturer in the world that would build any military equipment without first getting R&D funding from its own or any other government? How much has EADS gotten to build the ATF and yet still has not delivered one single plane (which was due in 1998) to Europe? The so-called unfair tax breaks for Boeing in Washington come to Boeing on what it sells, it actually has to produce something to get these breaks. Boeing doesn't get a dime from the state rather it simply doesn't have to pay the state as much tax on its profits and its property. That's quite different then launch aid which is mother's milk to EADS and Airbus.

@Delphino

I think you have it the wrong way around: Airbus is pursuing Boeing. Boeing completely outnumbers orders and net value compared to Airbus.

By the way, the government tax incentives offered by the individual State Governments are also available to anyone from any country. If fact, Airbus itself has been beneficiary of Washington State tax incentives. How does this compare to tax write-offs for research granted to Airbus? Should the A380 fail, it never risked any capital. This is CousineDave's point.

Furthermore, Airbus S.A.S is owned by EADS which produces: the Eurofighter, Airbus A400M, EADS Space & Defence & Security Systems Division. Criticising Boeing because it has similar divisions is like the pot calling the kettle black wouldn't you say?

The EU provision of launch aid and "forgivable" loans has created a moral hazard.

From a different angle this whole affair could mark the end the Franco-British partnership to build a new class of strategic aircraft carriers. If BAE pulls out of Airbus then the all-European ATF will probably never be built. While BAE's connection to the JSF will become even more irritating to the grandees of the European military project. Now that the British have delivered some very heavy hints that they may not participate further in the carrier building France will be left holding the bag. Unless it swallows its pride and either cancels the project or accepts the JSF as its fighter platform of the future. I see interesting times ahead.

James: come up with your source, and you will see that you were either lying, or mistaken that Boeing supercedes Airbus in the number of ORDERS it gets. In fact, it is the FOURTH straight year that this has not been the case.

Cousin Dave: "And a P.S.: I think that one thing that has blinded European eyes to the A380 situation is that it fits their pre-conceived notion of how things should be done in a statist society. The purpose of the A380 is to take a large collective mass of people from point A to point B. That's the very essence of mass transit. But what if some people aren't coming from point A, or don't want to go to point B? Doesn't matter; they still have to be funneled through A and B because, well, that's what statist societies do"

This is the most ridiculous, nonsensical thing I have EVER heard. Cousin Dave, you could have saved lots of time, and simply written, instead of your multi-para rant, "Look at me! I am mind-numbingly stupid." Why do you think Emirates and Singapore placed their orders? Are they too "statist societies." And I booked flight from London to New York are also jam-packed with dictators smoking cigars.

Yes, the bribing government officials of other countries to buy Airbus has helped their bottom line. We caught them once, I'm sure they've done it a lot more.

James,

Please. Please! PLEASE. PLEASE!

Would you stop using facts. You should know facts make euro’s grumpy. This is suppose to be a happy time. The euro’s are excelling in the one sport they can play.

Just because Euroland does no see the need for defense R&D should not be held against them when they always have the US to protect them.

I am just hoping this will change in the future. Congress has dropped funding to station a ABM system in Europe so maybe it is changing already.

My only recommendation to you is not to buy stock in EDS. Let the euro's do it. They have no need to prepare for their future when their government will care for their every need.

@delphino: 'This is the most ridiculous, nonsensical thing I have EVER heard. Cousin Dave, you could have saved lots of time, and simply written, instead of your multi-para rant, "Look at me! I am mind-numbingly stupid." '

So instead of addressing the substance of what you wrote, you attack me personally. And that proves you are right. Typical leftist thinking.

Have you looked at Airbus' orders this year? Have you heard ILFC publicly discussing cancelling their A380 orders? Pissing off Steven Udvar-Hazy is not a smart thing to do in the airline business.

There is definitely a market for a super jumbo, but it is questionable if the niche is big enough to be profitable for two competing super jumbos. I personally think Boeing made a wise decision not to crowd the niche at this time and perhaps enter later, but time will tell.

Delphino inadvertently demonstrates how poorly informed he is when he states: “Boeings tactic appears to be to dress up their old product in a new costume ... and call it a new aircraft."
He is not alone with this perception, and it is not completely his own fault, because the media in their Airbus euphoria have underreported the fact that the Boeing 787 will be a quantum leap in passenger jet construction. It will be the first large passenger aircraft to have a fuselage constructed primarily of carbon fiber. Obviously far from an “old product in a new costume”, I would say it is possibly even a bigger advance than the A380.
Since nothing like this has ever been done before, there are sure to be unforeseen problems, so we shouldn’t be too smug about Airbus’ manufacturing setbacks. We shall soon see if Boeing has foreseen enough time in their schedule for such eventualities.

@Germerican: You are absolutely correct in that Boeing shouldn't get too comfortable in its current position. The A380 isn't going away. Whether it makes money for EADS remains to be seen, but it's still going to be competition. Fedex, for one, has made statements this week standing behind its A380 orders. And yes, the 787 hasn't reached production yet, and you never know what might happen between now and then.

One thing Ray's original post touched on that I didn't mention previously is that there is an insider-trading scandal brewing at EADS. It seems that Noel Forgeard, who is regarded as the management hero of Airbus, sold a whole bunch of EADS stock back in March to the tune of millions of euros. If I understand the story properly, the timing of this sale was 2-3 weeks after the first internal memos began to circulate about production problems, but about a month before EADS made any public statement, and of course it was well before the recent profit warning. M Forgeard has of course dismissed this timing as coincidence, but a number of his relatives also sold EADS stock at the same time -- suggesting that they were tipped off. It looks highly suspicious. Further, DaimlerChrysler and Lagardere also sold large blocks of shares at that time. This week, the French stock market regulatory agency has been raiding EADS offices in France. And it appears that now the French government (which still holds 15% of EADS) has gotten crosswise with Berlin regarding management restructuring.

(There's one thing that I'm wondering about, that I haven't been able to find the answer to. At one time the French government held a "super share" in EADS that allowed it to veto any board decision. Is that still true? I've read a news article this morning, from the Times of London, that seems to state that the French government had previously signed some kind of pact with the other major shareholders agreeing not to take an active role in EADS' management. But the report suggests that the pact is non-binding, and that the French finance ministry may be prepared to discard it.)

In any event, it's a big mess, and it looks like it's about to get bigger. That's all I can say about it.

You know, its really a shame. The A380 is one of the great engineering and technical marvels of the 21st century, but, like the concorde, I believe the decision to produce the superjumbo was a political one and not an economic one.

The comments to this entry are closed.

Mission

The Debate

Blog powered by Typepad

February 2021

Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28