Airbus Tightens Belt With Corporate Shake-Up -- Update
September 30 2016 - 12:51PM
Dow Jones News
By Robert Wall
LONDON-- Airbus Group SE said it would merge its corporate
headquarters with that of its commercial-jetliner unit and
eliminate an unspecified number of management jobs in a fresh
effort to improve profitability.
Chief Executive Tom Enders said on Friday that the restructuring
would yield significant savings, facilitate faster decision-making,
and narrow a profitability gap with rival Boeing Co. Both companies
are scrambling to deliver planes to customers after racking up
record sales.
The two headquarters being merged are both in Toulouse, France.
The scale of the savings, as well as the number of layoffs and
costs to see them through, aren't clear yet, Mr. Enders said. Those
will depend on negotiations with labor representatives set to begin
next Tuesday.
"We aren't just trying to get leaner at the shop-floor level, we
are really starting at the top of the company," Mr. Enders said in
an interview. He said he expects the moves will yield financial
benefits starting next year.
Mr. Enders said the job losses won't be "insignificant" but will
be smaller than the almost 8,000 jobs cut in a previous
restructuring. The goal is to make the winnowing of management
ranks "as thorough and substantial as possible," he said.
The initiative is the latest in Mr. Enders' four-year campaign
to overhaul the company following the 2012 failed merger attempt
with Europe's largest arms maker BAE Systems PLC. "For me this is
the logical conclusion of the journey we started in 2012," Mr.
Enders said.
After the deal faltered on German government opposition, he won
shareholder backing for a new structure that reduced French, German
and Spanish government involvement in company decision making. The
old structure was a legacy of the founding of the company in 2000
through the combination of European aerospace and defense
assets.
Airbus in 2013 moved to merge defense and space assets and shed
some operations not central to its aerospace business. With the
latest shift, the move of headquarters functions to Toulouse from
their former home of Paris and Munich should also be completed, Mr.
Enders said.
Even though the restructuring is focused on the group
headquarters and commercial airplane unit, Mr. Enders said its
defense and helicopter activities remained "integral" to the
company. They would also benefit from reduced costs, he added.
Airbus also said Friday that as part of its revamp, Fabrice
Brégier, who runs the commercial airliner unit, will serve in the
newly created role of group chief operating officer, responsible
for supply chain and other functions to underpin the combination of
the airplane and group activities.
Despite an order book for jetliners that stretches out for
several years, Airbus faces financial pressures. Costs to build its
new A350 long-range jet have proved higher than planned. Its A400M
military transport plane has suffered technical problems and
delays, leading to repeated hits against earnings. In July, Airbus
announced a cut in production of the poorly selling A380 superjumbo
from 27 planes last year to 12 in 2018 and a return to losing money
building the flagship jetliner.
Mr. Enders said those pressures weren't driving the
reorganization. "The most important thing is the company becomes
faster and leaner and thereby enables transformation across the
entire group."
The chief executive has become increasingly concerned that
faster-moving technology startups could steal some the company's
business. Elon Musk's Space Exploration Technologies Corp., or
SpaceX, has already reshaped the rocket business, driving Airbus
also to pursue cheaper satellite launch options.
Airbus also faces stiff competitive pressure in its commercial
plane-making business where it and its larger rival Boeing have
enjoyed a period of record orders, swelling their combined backlog
to more than 11,000 planes to be delivered. Now executives at both
companies are focusing on how to build them profitably.
Boeing has been restructuring under Chief Executive Dennis
Muilenburg, who took the top job last year after running the
Chicago-based company's defense business. Mr. Muilenburg has
refreshed Boeing's executive ranks, promising growing margins for
the commercial airplane and defense units.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
September 30, 2016 12:36 ET (16:36 GMT)
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