Airbus Reorganizes To Take On Boeing Consortium Becomes A Corporation

Airbus Industrie said it will have the ability to use more subcontractors to cut costs as well as attract more outside investment under a plan to restructure the European jetliner maker reached Monday.

Four partner companies from four nations now run the consortium, which has about one-third of the world market while Seattle-based Boeing Co. has about two-thirds. To compete, Airbus wants investors outside the consortium to help finance plane development, and to be free of a costly company structure that forces it to make decisions based on political concerns rather than economics.

After pondering such a move for years, Airbus finally acted just weeks after Seattle-based Boeing enhanced its dominant position by announcing its plans to buy third-place jetliner maker McDonnell Douglas Corp. for about $14 billion of stock.

“The U.S. industry has been consolidating while the Europeans twiddle their thumbs,” said Peter Jacobs, an aerospace analyst at Ragen MacKenzie in Seattle.

Lauded by airlines for the quality of its aircraft, Airbus is thought to be much less efficient than its Seattle-based rival.

Because it isn’t a public company, Airbus’s profitability is difficult to determine. Airbus will say only that it has been profitable since 1990.

Airbus is owned by Aerospatiale of France and Daimler-Benz Aerospace of Germany, each with 37.9 percent; British Aerospace Plc of the U.K., with 20 percent; and Casa, or Construcciones Aeronauticas of Spain, which owns 4.2 percent.

The Toulouse, France-based consortium was created 25 years ago as a risk-sharing partnership, or Groupement d’Interet Economique, a structure peculiar to France originally invented to allow small wine growers to jointly market their crops.

Now, the company faces the daunting task of figuring out which assets will be transferred from the partners to the new company, which Alain Lamassoure, a spokesman for the French government, called “the toughest negotiations.”

Transfer of assets by the partners to the corporation will depend on how “essential” the assets are judged to be to the new entity, Airbus said in a statement. A valuation of the assets will be completed “by the end of 1997,” Airbus said.

The Airbus partners will each hold equity in the new company in line with the stake they hold in the partnership, Airbus said.

British Aerospace Plc said it expected its plants at Filton and Chester in the U.K. to be taken over by Airbus, though a final decision won’t come until the end of 1997.

Together, the plants employ about 4,000 of the 4,700 British Aerospace people working directly on Airbus planes. The company has another 2,000 workers who do some work for Airbus.

Airbus’s move toward becoming a corporation comes as its engineers are working hard to develop a new, giant jetliner designed to break the monopoly on the market for very large aircraft held by Boeing’s 747 jumbo jet. Airbus may be able to develop that airplane more economically if it can send work to partners outside of Europe.

Now, the company’s four partners are also its key subcontractors, winning manufacturing contracts in proportion to their holdings. That system has rendered the group less cost-efficient than Boeing, a single corporate entity with one management able to make decisions on the basis of costs alone. The European group’s goal is win 50 percent of the world jetliner market by 2000 or shortly thereafter.

“The agreement we signed is but the first step of a more global integration process of the European aerospace industry,” Aerospatiale Chairman Yves Michot told Paris daily Le Monde.

After Boeing bought McDonnell Douglas Corp. for $14 billion last month, “we realized Aerospatiale-Dassault, British Aerospace and Dasa didn’t weigh enough,” Michot said.

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