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EADS Plans 5800 Job Cuts

While commercial prospects remain bright, the move reflects a reduction in defense aerospace market in Europe. EADS needs to improve competitiveness to increase exports in military aircraft, like the A400M transport.

On Dec. 9, European Aeronautic Defense & Space (EADS) announced in a  press release its intent to restructure Airbus, into what it will call in the future its Airbus Defence and Space Division.

Overall, EADS plans to reduce its head count by 5800 positions at Airbus DS and in Corporate / Headquarters functions through the end of 2016.

This follows a decision by the EADS Board of Directors in July this year to consolidate the defense and space businesses of the Group into one new Division and to rebrand EADS into “Airbus Group”. The goal was to increase competitiveness, a prospect urgently needed according to CEO Tom Enders. “….For that to work, we need to cut costs, eliminate product and resource overlaps, create synergies in our operations and product portfolio and better focus our Research and Development efforts. That’s what the restructuring and integration plan for our defense and space business is all about,” he is quoted as saying in the press release.

The New York Times (12/10, Clark, Subscription Publication) reports on the move. The article notes that through the plan, which is part of the company’s “broad revamping announced last summer that refocuses the group’s activities on its highly successful commercial jet business,” EADS will cut 4500 permanent and 1300 temporary jobs from its 133,000-person workforce. The Times adds that the cuts “are expected to hit the hardest in Germany, where the bulk of EADS’s underperforming military and electronics division, Cassidian, is located.”

Bloomberg News (12/9, Rothman, Wall) adds that the cuts “are a reflection of its unfulfilled defense ambitions that have been relegated to a sideshow of the dominant Airbus civil aircraft business…. Created in 2000 from disparate European assets, the company was supposed to give the region an aerospace and defense powerhouse to match U.S. competitor Boeing Co. While Airbus pulled even with its arch-rival in commercial jet sales, defense activities have languished amid slack government support.”

“It’s an admission that market realities have left them no choice but to drastically scale back,” Richard Aboulafia, vice president at the Teal Group in Fairfax, Virginia is quoted as saying in the article. “Their home defense markets have collapsed.”

A piece by Defense Industry Daily (DID, 12/11, Staff) argues that the move may be too little, since by 2018 the company may receive only 80% of defense related product bookings it currently enjoys today. “In that light the consolidation of very different product ranges under one umbrella may not be enough to solve Airbus Military’s issues.”

Reaction - Angry French and German governments

According to euronews (12/10), the move is upsetting to the French and German governments. “Unions have also been long opposed to the reductions which will come over the next three years as part of the reorganization of EADS’s defence and space activities”  According to this article, the plan cuts 2600 positions in Germany, 1,700 in France, 700 in Britain and 600 in Spain.

Reuters (12/9), the Wall Street Journal (12/10, Cauchi, Subscription Publication) and other media sources also cover the story.



Published Date : 1/6/2014

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