Amidst all the other issue clutter these days, my perch at Defense Industry Daily has given me a window into a largely-ignored event: the slow-motion collapse of Airbus, that monument to Euro-socialism and pan-European flagship. It would be trite to say its key problem is that it's run by Europeans in the European vision, but this would also be more or less true.
See DID's coverage of BAE Systems' sale of its 20% stake in Airbus... even though the assessed valuation was less than half of what BAE expected. The Board's rationale for the sale is damning, and the 99+% shareholder approval that followed was worse. Meanwhile, EADS shares continue to spiral downward, and management & governance looks like a Keystone Cops episode. Giovanni de Briganti, of Defense Aerospace, has an excellent current overview that includes this excerpt:
"Politicians and trade unions of all stripes are calling for calm, deliberate resolution of employment and structural issues, even as analysts are cutting valuations, A380 buyers are demanding financial penalties for late delivery, and investors are selling off their EADS shares."
It gets worse.
Investment in the A350, aimed at a much larger mid-size market that Boeing is currently cleaning up on with its 777 et. al., may not get off the ground. Why? Because the enormous A380 super-jumbo needs the cash to fix its ongoing problems; a move that adds opportunity cost subsidies to the massive A380 development subsidies from the European taxpayer (the A380 has already cost $12 billion equivalent to develop). All amidst a future of steadily high oil prices, in which arch-competitor Boeing sat down years ago and bet on a need for greater fuel efficiency as its key future design driver. Sure beats Europe's chosen business driver, which was "prestige and feeling good about our political project."
That legacy continues to reap a bitter harvest. Throughout this mess, notice the way political, prestige, and other priorities are consistently being put before the needs of the business' customers - and the needs of the business itself. And the solution as warning signs appear? More "oversight" from politicians, corporate HQ, et. al. Hey, if some gasoline makes you cough, why not drink the whole can so you can feel better! No wonder even Deutsche Welle is sounding alarm bells about Europe's "flight of fancy."
Socialism is a farce at the best of times, but watching the various unions, Eurocrats, and government appointees try to play businessman and tell EADS/Airbus how to run their affairs in a major global industry is even funnier than usual. Tell us again how Europe is going to dominate the world economy with this approach, Mr. Rifkin. It's been a hard week, and I could use the laugh.
When all else fails, there is always tourism.
I hear that Sparta is very quaint.
It is, but Athens beat them out with a "Peloponesian War Cruise party crawl" that sails around Greece, drops its passengers off in appropriate towns to parrty and cause mayhem, then sails back to Athens at the end.
Apparently some people are urgining caution re: agressive plans to expand the operation to Sicily, where, ah, "local interests" may take too much of an interest in the cruise. Word is that this counsel has been rejected by the PW Cruises Board.
Are you saying Boeing, one of the biggest recipients of government funds, isn't a socialist enterprise?
The jetliner business is up and down.
Just a few years ago, it looked like Boeing was done and Airbus would be the only jet maker.
And Boeing's new plane hasn't even had it first test flight yet, btw.
#2 from Joe Katzman: "It is, but Athens beat them out with a "Peloponesian War Cruise party crawl" that sails around Greece, drops its passengers off in appropriate towns to parrty and cause mayhem, then sails back to Athens at the end."
Envious Athenian tourists have reported that many of the finest babes to be seen on these tours are already "spoken for" and sporting T-shirts that say: "I got conquered by Brasidas!"
Joe,
Great post! The continental European emphasis on protecting current jobs at the expense of future opportunities with more economically viable jobs is on full display. Deutsche Welle even echoes your point about the opportunity costs of salvaging the A380 ....... and then counsels against any solution that involves job cuts.
"The real consequences of the Airbus crisis can only be speculated about at this point. Technicians will certainly manage to get the wiring problem under control. But it's already clear that A380 delays can lead to delays for other Airbus projects as well. All resources now have to be deployed to salvage the prestigious project, letting others -- including succeeding generations of bestseller models -- fall by the wayside. Rivals will occupy that niche -- and give the Europeans a headache".
"One can only hope that those occupying the executive floors at EADS and Airbus now make the right decisions, and that it doesn't again end with job cuts. Otherwise, the European flight of fancy will end with a crash landing".
Unfortunately, without closing money-losing plants and streamlining production, AirBus won't have the money to both salvage the A380 and pursue those other opportunities. Unless they can get European taxpayers to .....invest..... many additional billions of Euros.
This strategy has always worked before. Is there any reason to believe that the French and German governments and others won't eventually make additional huge grants or loans to AirBus?