Airbus to Slash Cost by EU300 Mil in 2007

June 16 (Bloomberg)Airbus SAS will reach a goal of cutting costs by 300 million euros ($401 million) in 2007 under the so-called Power8 plan after its first loss last year because of A380 delays, Chief Executive Officer Louis Gallois said.
``We're completely on track for the savings of Power8 in 2007,'' Gallois said yesterday at a briefing for journalists before the Paris Air Show, which starts June 18.
Airbus, the world's largest maker of commercial planes, plans to slash costs by 2.1 billion euros annually by 2010, eliminating 10,000 jobs and selling or finding partners for six factories. The company needs the savings to help pay for the development of a new 270- to 350-seat aircraft to compete with Boeing Co.'s 787 Dreamliner.
European Aeronautic, Defence & Space Co., the owner of Airbus, expects two-year delays on the 555-seat A380 will reduce earnings by 4.8 billion euros over the next four years. The company has orders for 160 of the superjumbo aircraft. Boeing has 584 orders for the Dreamliner, which will enter service next year, while Airbus has only 13 for its A350 XWB, scheduled for delivery five years later.
Gallois said higher research costs and an increase in the euro against the dollar mean the 300 million-euro savings won't translate into higher profits. The company has forecast a substantial loss for this year. Airbus, based in Toulouse, France, has about half its costs in euros while planes are priced in dollars.
The dollar has lost 40 percent of its value against the euro since December 2000, when Airbus committed to building the A380. Gallois said every 10-cent decline in the dollar against the euro costs Airbus 1 billion euros in profit a year. He indicated additional savings may be needed.
Euro Costs
``The problem is that our costs are in euros,'' he said. ``We can't stay immobile if we have in front of us a changing environment. We will have to take decisions.'' Asked to specify what that would mean, he responded, ``I prefer not to say.''
Tom Enders, EADS Co-CEO, said at the briefing that that while 60 percent of sales come from outside Europe, the percentage of materials sourced from outside the region is less. About 76 percent of suppliers come from Europe, 21 percent from North America and 3 percent from the rest of the world, he said.
``No doubt about it: This will change as well,'' Enders said. ``We'll need strong industrial footprints, in development and in manufacturing in other parts of the world.''
An example of the trend is Airbus's plan to build an assembly line for single-aisle A320s in China. The planes compete with Boeing's 737 model and both are favored by low-cost airlines.
MBDA Purchase?
Airbus expects to choose a short-list of potential buyers or partners for six plants by the end of July. The factories for which Airbus seeks partners or buyers are in Laupheim, Varel and Nordenham in Germany, in St. Nazaire-Ville and Meaulte in France, and Filton in the U.K.
Gallois, who also holds the title of EADS co-chief executive, said the region's largest aerospace company may be interested in buying out its partners in MBDA, a missile-making venture in which it has 37.5 percent. BAE Systems Plc has 37.5 percent and Italy's Finmeccanica SpA has 25 percent.
``MBDA is a core business for us,'' he said.
Sales at MBDA, the world's second-biggest missile maker after Raytheon Co., rose 3.1 percent last year to 3.3 billion euros after buying Lenkflugkoerpersysteme AG, whose products include the Taurus missile Germany uses on Eurofighter jets.
The venture also makes Aster missiles deployed on Type 45 destroyers built for the U.K. Royal Navy, the Meteor missile for airborne air defense and the Storm Shadow, a conventionally armed, standoff air-to-ground missile.
BAE Won't Sell
BAE said yesterday the stake isn't for sale.
``We do not generally comment on matters of this kind,'' said spokesman Guy Douglas in an e-mailed response to questions. ``However, I can say that we have no plans to sell our stake in MBDA at this time.''
A spokesman for Finmeccanica, who declined to be identified, said the company didn't plan to sell its stake MBDA.
Gallois also said when asked that EADS isn't currently looking to sell its 50 percent stake in turbopropeller plane maker Avions de Transport Regional. Finmeccanica owns the other 50 percent.
Gallois said that only four years ago ATR's owners were wondering whether to shut down the planemaker for lack of orders. Since then, rising oil prices have produced a flood of orders because turbopropeller planes are more fuel efficient than regional jets.
Asked whether EADS might look to sell its 46 percent stake in Dassault Aviation, a maker of fighter jets and corporate planes, Gallois said that's not planned.