I’m no expert in international trade, but I don’t think I need to be to have an opinion about the latest travails of Airbus, which is under heavy political pressure not to cut back on its work force.
Airbus has long been accepting money from Germany and France in the form of loans that don’t have to be paid back – a move that gives it an incredible economic advantage over its rival, the Boeing Co.
Now France and Germany are saying Airbus needs to back off on the layoffs that planemaker’s new chief executive insists are needed. That puts Airbus in the painful position of either maintaining a payroll that its sales can’t support, or biting the hands that feed it.
I don’t feel a bit sorry for Airbus. It really is a case of wanting to have your cake and eat it, too. And that’s not going to happen.
For those of you who also aren’t international trade experts, let’s take a quick look at the history and the issues.
Boeing has long complained that the so-called loans that France and Germany give to Airbus to develop new airplanes violate trade rules. Loans that don’t have to be paid back are really just gifts, and that gives Airbus a strong advantage because it doesn’t have to borrow the money and pay it back with interest, or cough up the development dough itself long before it will get any return.
Airbus has looked at things such as the money and other perks Washington state has handed out to encourage Boeing to build the 787s in our state as the same thing, government aid.
You can argue that, but what you decide about Boeing’s situation doesn’t make what Airbus does smell any better. That would be like cheating on a school test to get ahead and telling your mom it was OK because Jimmy did it.
After billions of dollars in government support over three decades, Airbus finds itself $2 billion in debt and two years behind schedule in producing its new product, the A380 superjumbo jet.
The disaster prompted officials to bring in a new CEO, Christian Streiff, to fix the production problems. He came up with a plan to consolidate the wide-body work in France and the work on narrow-body jets in Germany, not unlike Boeing’s scheme of building the big jets in Everett and the smaller ones in Renton.
He called for outsourcing more of the parts, again similar to what Boeing is doing by gathering partners in Italy and Japan to share the workload and the risk for its new jet, the 787 Dreamliner
But wait.
Political officials put the arm on Streiff, appearing to care more about jobs than efficiency. So he quit after only three months.
Enter Louis Gallois, the new chief executive.
He, too, said Airbus needs to cut jobs to climb out of red ink and make it competitive again, but he’s insisting he will balance the cuts between participating nations. “We know that if we ask for cuts, we have to ask for balanced efforts between the different countries,” Gallois said.
That would be like Boeing working to get approval for its business plan from the mayors of Everett and Lynnwood.
Right now, a ton of cliches are running through my head. Phrases like, “That’s no way to run a railroad,” or “That dog don’t hunt.”
However you phrase it, allowing competing nations and politicians to tell you how to run your business is a foolish idea, even when those factions have an ownership stake.
A recent article in the Washington Post noted that DaimlerChrysler AG owns 22.5 percent of EADS, the Airbus parent firm, while Paris-based Lagardere SCA owns 7.5 percent and the French government a 15 percent stake in the group. Germany has indicated it may acquire a 7.5 percent stake from DaimlerChrysler. Spain is seeking to increase its 5.5 percent stake, and Russia’s Vneshtorgbank also declared last month that it had acquired 5 percent of EADS on the open market.
Making everyone in that group happy while making your company competitive is a larger task than you should expect from any chief executive.
I mentioned before that I can’t feel sorry for Airbus, although I do for Gallois, who’s in an impossible position. If I wasn’t already above my cliche limit, I’d say the guy was between a rock and a hard place.
But Airbus has skated too long on government subsidies. Now it’s payback time. And the interest rate is steep.
Mike Benbow: 425-339-3459; benbow@heraldnet.com.
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