labels: EADS, Aerospace, News reports, Defence production, Airbus
EADS board clears divestment of manufacturing plants to European firms news
21 December 2007

Amsterdam: EADS and Airbus have chosen three European companies as the preferred bidders for their controlling stake in the six factories marked for divestiture as part of the Power8 restructuring programme.

EADS and Airbus have selected Latécoère in France, GKN in the UK and MT Aerospace in Germany as preferred bidders for the sites of Méaulte and Saint Nazaire Ville in France, Filton wing component and sub-assembly manufacturing facility in the UK, and Nordenham, Varel and Augsburg in Germany.

The EADS Board of Directors has authorized the management of EADS and Airbus to enter into negotiations with the preferred bidders on remaining issues and the required final due diligence with the aim of achieving a final agreement as soon as possible. The board said that it expects substantial progress on the share purchase agreement in the first quarter of 2008.

The EADS Board also said that it sees this decision as a clear commitment of the management to the Power8 targets.

According to the board, the partner selection for Filton will allow for an outright sale of the manufacturing part of the site to GKN. For the French and German sites, the agreement with Latécoère and MT Aerospace will take the form of joint ventures, in which Airbus will retain a substantial minority shareholding. Airbus, However, it will retain the option to withdraw completely after three years.

The joint venture structure will allow Airbus to closely monitor the transition during the period of A350 XWB development, while reducing substantially EADS' cash outlays. Under the joint venture agreements, Airbus does not intend to interfere in the majority shareholder's management of each plant.

The Airbus plants targeted for divestment employ a total of 7,400 employees, and represent € 1.4 billion of Airbus' cost base in 2007. EADS Defence & Security's plant in Augsburg employs 2,000 employees and represents around € 450 million of its cost base in 2007. About 70 percent of the Augsburg plant's revenues come from Airbus.

"The ongoing divestment of sites and the building of a network of partners for Airbus allows EADS to focus its resources on core activities. It is a way to optimise Airbus' industrial set-up in the frame of the extended enterprise. At the same time, it helps EADS to reduce financing needs in a period strained by conjunction of costly programmes and weak dollar uncertainty," said EADS CEO Louis Gallois.

''This decision is an important milestone for Airbus' new strategy and Power8 programme. We will work to progress and conclude the negotiations as swiftly as possible. At the same time, we can now begin to establish long-term partnerships with three first tier suppliers for the A350 XWB, who will share workload, investment, risk and future benefits with us. The bidders will now be invited to the A350 XWB development plateau thus supporting the ongoing A350 development immediately," said Airbus president and CEO Tom Enders. ''This process will generate strong tier one partners for Airbus, and will allow the sites to further develop and acquire the required technologies to remain competitive in the future.''

The transactions are expected to be closed in summer 2008, when the sites will be effectively transferred to the new owners. Meanwhile, these sites will continue to produce their parts for the existing Airbus products (A320 Family, A330/A340 Family, and A380) for which Airbus has an order book of some 3,000 aircraft. The finalisation of transactions is subject to agreements on terms and conditions (such as governance issues, exit mechanisms, etc.) and the demonstration of satisfactory financing structures and backing by the buyers.

The Power8 programme is a comprehensive improvement programme designed to reinforce Airbus' competitiveness in the face of the weakening dollar. It will enable Airbus to become more efficient and productive through a complete turn-around of the company. This involves becoming more integrated, with simpler processes, implementing lean manufacturing, shortening development times and reducing the number of suppliers.

A350 XWB work packages will now be allocated to the future tier one partners in Filton, Meaulte and St Nazaire Ville, as well as Nordenham, Varel and Augsburg. The pace and schedule of final negotiations with the preferred bidders at this stage is consistent with the ongoing A350 XWB development timeline. The site divestment process for Laupheim continues in parallel.

EADS is a global leader in aerospace, defence and related services. In 2006, EADS generated revenues of € 39.4 billion and employed a workforce of about 116,000. The Group includes the aircraft manufacturer Airbus, the world's largest helicopter supplier Eurocopter, and EADS Astrium, the European leader in space programmes from Ariane to Galileo. Its Defence & Security Division is a provider of comprehensive systems solutions and makes EADS the major partner in the Eurofighter consortium as well as a stakeholder in the missile systems provider MBDA.

EADS also develops the A400M through its Military Transport Aircraft Division.

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EADS board clears divestment of manufacturing plants to European firms