- The Washington Times - Thursday, October 12, 2006

PARIS (AP) — France and Germany urged Airbus yesterday to keep job losses to a minimum as it restructures, and German Chancellor Angela Merkel indicated that her government is considering the acquisition of a stake in EADS, the troubled jet maker’s parent company.

The comments by French President Jacques Chirac and Mrs. Merkel after a summit in Paris underline the pressure on new Airbus Chief Executive Officer Louis Gallois as he prepares to announce a major turnaround plan for the company.

Mr. Gallois has warned of “painful” job cuts at Airbus as he pushes ahead with cost-cutting targets identified by Christian Streiff, his predecessor. Mr. Streiff quit Monday after just three months on the job, citing resistance to change in the EADS boardroom.

France and Germany “will together ensure that all the company’s employees benefit from the greatest possible job security on all the sites concerned,” Mrs. Merkel said in a press conference with Mr. Chirac.

“We cannot intervene in the economic sphere, but we can give our political support,” she said.

The French state owns 15 percent of EADS but — in theory — leaves decision making to the other French shareholder, Paris-based Lagardere SCA, which owns a 7.5 percent stake.

DaimlerChrysler AG, until now the only significant German shareholder with a 22.5 percent stake, has indicated it wants to pare that holding to 15 percent.

Mrs. Merkel confirmed yesterday that the German federal government is examining the possibility of buying part of the carmaker’s EADS stake.

“We have not made any decision, but I have not ruled anything out,” Mrs. Merkel said, adding that the acquisition was currently being discussed among ministries.

The consultations “will lead to decisions that show that Germany’s commitment to Airbus and EADS is as strong today as it has been in the past,” she said. Making sure the company had “reliable investors” was a priority.

Russia’s state-owned OAO Vneshtorgbank alarmed EADS and its political patrons last month by saying it had amassed a 5 percent stake in the Franco-German defense group. Mr. Chirac and Mrs. Merkel reiterated yesterday that a Russian seat on the EADS board was out of the question.

Mr. Chirac said the burden of any Airbus cuts should be “harmoniously shared” between Germany and France. He also sounded a warning note about any moves to outsource more Airbus work beyond France and Germany.

The changes should “take as much account as possible of the interests of subcontractors who work on Airbus projects in Germany and in France,” Mr. Chirac said.

Besides a two-year delay to the flagship Airbus A380 jet — set to wipe $6 billion off EADS profits over four years — the company faces a further squeeze from the weaker U.S. dollar, which hits revenue in euros because planes are sold in dollars. Analysts say outsourcing more work to lower-wage economies would help address that problem.

EADS needs all the cash it can get if it is to go ahead with plans for a new $10 billion midsized-jet program, which has more than tripled the Airbus order book so far this year and is greatly needed to stay competitive with Boeing Co.

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