Power8 Prepares Way for "New Airbus"

Following the unanimous approval by the EADS Board of Directors on Monday, Airbus today presented the details of its Power8 restructuring plan to the Airbus European Works Council and announced the creation of a new industrial and operating structure for the Company.

 

Power8 will enable Airbus to face the very substantial challenge of the US dollar weakness, increased competitive pressure, the financial burden related to the A380 delays as well as meet its other future investment needs. Power8 provides for strong cost-cutting measures, aims at transforming the Airbus business model and the development of a global network of partners. It will allow Airbus to devote its resources to core activities and eliminate inefficiencies within its current structure. The programme aims at the full industrial integration of Airbus by establishing a new industrial organization with transnational Centres of Excellence replacing the existing national structures. This transformation will happen progressively over several years and includes the further extension of Airbus’ global footprint.

 

As part of Power8, the Airbus management will implement strong cost reduction and cash generating efforts leading to EBIT contributions of € 2.1 billion from 2010 onwards and additional € 5 billion of cumulative cash flow from 2007 to 2010. A large part of the cost savings will be achieved through reducing the total Airbus overhead workforce (including temporary and on-site supplier workforce) by 10,000. The envisaged measures to reduce overhead costs, and specifically headcount, require a provision of € 680 million to be taken in the first quarter of 2007. Airbus has put in place a robust tracking system with tangible matrix regarding cost and cash impact up to their materialization in the financial statements.

 

Airbus has the full support of all EADS core shareholders for Power8. The EADS and Airbus management has reviewed the programme thoroughly and is convinced that the envisaged measures will deliver on its economic promises. “The core objective of the programme is to make Airbus more efficient and competitive, so as to produce the most advanced and profitable products, and to serve its customers better in the future”, the CEOs of EADS Tom Enders and Louis Gallois said.

 

“We have had an excellent sales and delivery performance in 2006. But our long-term future is at stake if we don’t act now,” Mr Gallois, who is also Airbus President and CEO, said. “We fully appreciate that this transformation must be undertaken jointly and in close consultation with our social partners”. Airbus will report a negative EBIT in 2006 and, following the A380 delays, faces significant cash needs and deteriorating profits in the future, together with large investments needed for current and future programmes, in particular the A350 XWB. More fundamentally, the Dollar weakness alone has led to a 20 percent loss of competitiveness in only six years versus Airbus’ competition. “We cannot continue to produce at our current Euro costs and sell at Boeing’s dollar prices,” he said.