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Two Execs Quit Amid Airbus Woes

CEOs at the aircraft maker and its parent firm exit as criticism over A380 delays mount.

July 03, 2006|Peter Pae | Times Staff Writer

The top executive at the parent company of Airbus resigned in a dramatic management shake-up after weeks of turmoil over production delays of the European aircraft maker's new super-jumbo jetliner.

European Aeronautic Defense & Space Co. said Noel Forgeard, its co-chief executive, and Gustav Humbert, the head of the Airbus unit, resigned, effective immediately.

The resignations occurred just days after Forgeard insisted he would not step down and defended his sale of stock options months before the announcement of the production delays that sent company shares plummeting.

"I did it solely for the company's interest, to end a situation that could have compromised the resolution of Airbus' current problems," Forgeard said.

Shares of the Franco-German company plunged more than 26% on June 14, wiping out $7 billion in value, after it said wiring problems with the double-decker A380 would delay production by as long as seven months.

The production woes, which Airbus estimated would cut profit by about $2.5 billion over four years, turned into a major scandal after French regulators said they were investigating the sale of stock options worth more than $8 million by Forgeard and his three adult children.

In a statement Sunday, Forgeard said that his resignation was voluntary and that the stock probe and the production delays had no role in his departure.

Aviation analysts lauded EADS for the quick action to resolve the management turmoil, saying the shake-up could help the company recover more quickly from the crisis.

"It can only rebound in Airbus' and EADS' favor," said Scott Hamilton, an aviation consultant in Sammamish, Wash. "I think airlines will take favorable note of the rapid action."

Major international airlines have been critical of Airbus in recent months, and the complaints turned into outcries after the announcement of the production delays, its second in as many years.

The day after the announcement of the delays, Singapore Airlines, one of the industry's more influential buyers and the first to purchase the A380, ordered 20 of the new, fuel-efficient 787 airliners being developed by archrival Boeing Co. The order is valued at about $4.5 billion.

Boeing's sales have surged as Airbus has struggled with the development of the A380 and its indecision with developing a competing model to the 787, which is scheduled to begin service in 2008.

Some analysts predict Boeing will regain the title as the world's largest aircraft maker next year. Toulouse, France-based Airbus surpassed Chicago-based Boeing for the first time in 2003.

John Leahy, the Airbus salesman credited with helping Airbus topple Boeing's lead, is expected to survive the management turmoil, which has been exacerbated by French-German rivalry within EADS.

Leahy is an American from New York. France's Lagardere and Germany's DaimlerChrysler are the two main shareholders of EADS, which owns 80% of Airbus.

Because of the ownership arrangement, EADS has two headquarters -- in Paris and Munich -- and two chief executives, one French and the other German. Major manufacturing facilities for Airbus are also split between France and Germany.

Louis Gallois, currently the head of France's state railway, will replace Forgeard. The deputy chief executive of French industrial conglomerate Saint-Gobain Group, Christian Streiff, will become the first outsider to run Airbus.

Forgeard's departure brings to an end a tumultuous year marked by his squabbles with German fellow executives. Before becoming co-chief executive at EADS, Forgeard ran Airbus from 1998 to 2005. It was during that time the aircraft maker began developing the A380, the world's largest passenger jet.

His appointment as EADS co-chief executive was opposed by German shareholders. The rivalry intensified when Forgeard blamed the A380 production delays on wiring problems at an Airbus plant in Hamburg, Germany.

Although Forgeard fought to keep his job to the end, his fate may have been sealed last week when French President Jacques Chirac reversed his support for the longtime ally, saying in a French television interview that action was needed to resolve the management turmoil.

Shortly after Sunday's resignation announcement, French Finance Minister Thierry Breton said in a radio interview that the French government supported the management shake-up.

"It will strengthen German-French cooperation," he said.

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