EADS Plan to Sell German Airbus Plants Collapses | Business| Economy and finance news from a German perspective | DW | 27.03.2008
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EADS Plan to Sell German Airbus Plants Collapses

Plans to sell three Airbus plants in Germany have been scrapped after talks between the three parties involved collapsed on Thursday. But Airbus parent EADS did score a lucrative contract with Britain's Royal Air Force.

Dark clouds hang over the Airbus production site in Laupheim, near Ulm, southern Germany

The restructuring plan put in place to save Airbus has been besieged by problems

EADS had been in talks with Bremen-based aeronautics company OHB Technology's MT Aerospace unit and US private equity investor Cerberus on the sale of three plants employing a total of 6,800 workers at Varel and Nordenham in northern Germany and Augsburg in the south.

EADS had announced in December that MT Aerospace was its preferred bidder to acquire plants and as recently as last week denied reports that the negotiations had broken down.

According to the Airbus statement, OHB had turned out to be the wrong partner and that the parties involved in the negotiations had failed to agree on a "viable industrial and financial solution".

Airbus investor search continues

Airbus chief executive Tom Enders

Airbus CEO Enders was not convinced by OHB's approach

Airbus chief executive Tom Enders said Airbus would continue to search for a strong partner prepared to share research and development costs at the plants, adding that, "We simply could not get there with OHB."

"We have always said that we will only go for economically and industrially sound solutions," Enders said in a statement. "We want to ensure the future of our sites with strong partners who share technology, development costs and capital investments and are able to deliver large work packages at competitive costs."

Airbus would search for other solutions and "in parallel, will proceed with the carve-out of the three sites," the company statement said.

Breakdown blamed on strong euro

Airbus A380

The delayed roll-out of the A380 cost Airbus dearly

Analysts blamed the breakdown on the declining dollar, noting that the talks had started with the euro at $1.35, against almost $1.60 at the current rate. An OHB statement said that the euro's strength lowered the prospects for an adequate return on their planned investment in the plants.

Airbus admitted that the volatility of financial markets and the rise of the euro against the dollar had created obstacles "to an easy and smooth implementation of this process."

The site divestment strategy is part of a vast restructuring plan announced in February last year dubbed Power8, which involves 10,000 job cuts over four years and the sale of six Airbus factories. The major restructuring follows on from severe losses resulting from a two-year delay in delivering the Airbus A380 superjumbo.

The other sites up for sale are the Filton works in Britain and the French plants at Meaulte and Saint Nazaire.

"There will be no turning back" from efforts to attain the plan's goals, Enders added.

EADS wins British contract

There was, however, some good new for EADS on Thursday. The European aerospace consortium won a 13 billion pound (16.7 billion euro; $26.5 billion) deal to replace Britain's fleet of air-to-air refueling planes in what is possibly the world's largest government outsourcing contract.

Boeing wird Protest gegen Tankerflugzeug-Auftrag an EADS einlegen

EADS beat out Boeing for the Pentagon deal in late February

The 27-year-contract involves leasing 14 converted Airbus passenger jets to the Royal Air Force -- marking the first time Britain's Private Finance Initiative has been used for a top military program.

"This is an innovative PFI program which will provide the RAF with modern highly capable air-to-air refueling and passenger transport capability," Defense Equipment and Support

Minister Baroness Ann Taylor told reporters.

The deal comes after years of negotiations and on the heels of another deal to supply the US Department of Defense with refueling planes.

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