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EADS Accelerates Cost-Cutting Program

European aerospace consortium EADS, the parent company of Airbus, has expanded its Power 8 cost-saving program to counteract the weakness of the dollar against the euro on Tuesday, Sept. 9.


The EADS cost-cutting program will have implications for Airbus and the A380

Unlike the original plan, which was created in response to losses suffered by Airbus because of wiring problems with its A 380 superjumbo jet, the new "Power 8 plus" program involves the entire company and should save about 1 billion euros ($1.41 billion) beginning in 2010, the French daily Le Monde reported .

Of that amount, savings at Airbus will total about 650 million euros, while measures involving the EADS Eurocopter subsidiary as well as the space and military transport divisions will account for 350 million euros in reduced costs.

Moving production to US dollar zones

Part of the A380 is packed ready for transport

Airbus could be on the move to the United States

A large part of the savings at Airbus are to be achieved by moving production to "US dollar zones" or where labour is less costly than in Europe.

EADS chairman Louis Gallois said that Airbus would have to "increase its presence in India given the number and quality of its (India's) engineers." The French-speaking Maghreb region of North Africa was of interest "for standard production because of the costs."

Gallois told Le Monde about plans to build one Airbus factory in Tunesia and a production base in China "for reasons of proximity to market", where there have been some big orders for passenger jets. The factory, where Airbus is already setting up an assembly line in China for its single-aisle A320 aircraft, is expected to open at the end of September.

Gallois added that it was "important" for Airbus to have a production site in Russia as well and mentioned Mexico, where the French group Safran makes engines and has production facilities, as a possible gateway to the North American market.

The German chief executive of Airbus, Tom Enders, said in the statement: "Power8 is the centre piece in Airbus' restructuring and integration efforts and we have been very successful in achieving our targets so far."

But he added "further measures to improve our cost base and overall efficiency are necessary to secure the long-term competitiveness of our company."

"By pushing forward with internationalization we secure growth, we take advantage of lower cost structures, we access talent on a world-wide basis and, simultaneously, support employment and core competences in Europe."

Redundancies not mentioned

Louis Gallois, CEO of EADS

Louis Gallois, CEO of EADS

French chairman Gallois said that the new plan did not include any reference to job cuts because "growth of the market is such that we can carry it (the plan) out without putting in question our existing installations, which we are continuing to modernise."

The first Power8 cutbacks, which had been announced in 2007, stipulated the loss of 10,000 jobs, of which half are at the sub-contractor level.

Gallois said that Airbus intended "to invest in the most sophisticated production facilities in France, and particularly in composite materials," and to do the same in Germany and Spain where aircraft parts are also built.

EADS shares up by 2.7 per cent, at 15.61 euros, in late Tuesday afternoon trading on the Paris Bourse.

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