Airbus, Europe's joint aviation operation, runs into turbulence. Plane producer getting good orders, but organizational problems appear
Just as Airbus Industrie seemed to be gaining altitude, this symbol of European high-tech cooperation has hit heavy turbulence: disagreement among its three main shareholders. The dispute pits the France, West Germany, and Britain in a battle to replace the consortium's top two officials. But it raises a larger question about European industrial cooperation dependent on large government subsidies: Should Airbus continue fighting for a share of the world's civil aviation market no matter the cost, or should it pay more attention to the bottom line?
An answer will come only when Airbus's new management is sorted out. The man who built the company with little apparent concern for costs, Frenchman Bernard Lathi`ere, was forced from the presidency late last month and replaced by another Frenchmen, Roger Betielle. Mr. Betielle, however, has announced his intention of retiring in June. Meanwhile, the British and Germans are pushing for the top posts -- and for more-stringent business practices.
``We have to consider a new arrangement,'' one Airbus official says. ``The company has changed, and so its structure has to evolve.''
The forced evolution stems in large part from Airbus's recent success. After winning several hotly contested Asian contracts, the company established a solid footing in the United States market with last fall's spectacular 28-plane deal with Pan American.
At the same time, Airbus moved to secure its future by launching the development of a new 150-seat plane, the A-320. By widening the Airbus production range, the small model has impressed industry analysts -- and even its principal rival, Boeing.
``Until now, Airbus has only had large, long-range planes,'' a Boeing executive comments. ``This will give them a family of aircraft and assure that they remain our main competitor.''
These successes, however, also highlighted the weaknesses of the company's financial structure.
According to the Boeing executive and other airline analysts, only a company paying little attention to profits could have afforded the low sale price to Pan Am and the huge start-up costs for the new aircraft.
``We have construction costs 25 percent less than they do, and yet we can't equal their price on contracts such as Pan Am,' the Boeing executive said. ``Draw your own conclusions.''
The consortium itself admits it is not like any American company. With no capital of its own, it is dependent on shareholder subsidies. Under French legislation, it has never been forced to publish profits and losses.
In the process, production costs are not appraised. Airbus officials say the decentralized production system -- plane parts are produced among the four partners (Spain holds a minor 4.2 share) before being assembled in Toulouse, France -- make calculations impossible.
The lack of control hurt Mr. Lathi`ere. Warm and jovial, he made a superb salesman. But these may not now be the qualities the company needs most. As Airbus gears up to produce the new A-310, it is making increasing financial demands on the shareholders, who have already committed around $5 billion and are reluctant to commit more without organizational changes. This reluctance, combined with various reports concerning Lathi`ere's grueling working pace and problems in his personal life, finally forced his departure.
Such are the stakes in the ensuing succession battle that government officials are playing key roles. French Prime Minister Laurent Fabius has insisted publicly that French executive Jean Pierson of Aerospatiale be appointed chief executive. According to published reports, the Germans were ready to accept Mr. Pierson in return for being able to appoint the No. 2 man, but then the British demanded a greater voice of their own. The British are reportedly seeking a managing directorship, too, preferably with control over finances.
Airbus says the dispute will not prove fatal. While Lathi`ere frequently acknowleged that Airbus ``has our differences like any family,'' he emphasized that the common interest in retaining a foothold against the Americans in the civil aviation field would always hold the Europeans together. Airbus officials say that common interest remains strong.
But family squabbles can strain ties and threaten cohesiveness. In its competition with US companies, Airbus could find any weakness a drag on its ability to secure a profitable share of the world's airline market.