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Airbus' strategy is being redrafted

February 21, 2007|From the Associated Press

PARIS — Airbus Chief Executive Louis Gallois is drawing up compromise restructuring proposals after the main German shareholder blocked a plan designed to help the aircraft maker cope with costly production delays, people familiar with the discussions said Tuesday.

Tuesday's scheduled launch of the long-awaited Power8 strategy was called off after representatives of DaimlerChrysler refused to endorse the plan at a Sunday board meeting of Airbus parent company European Aeronautic Defense & Space Co. The defense group said talks had stalled over where to build the A350 XWB, a planned rival to Boeing Co.'s 787.

Gallois, a Frenchman who also serves as co-CEO of EADS, has agreed to make changes to the plan, two people with knowledge of the talks said.

Toulouse, France-based Airbus is struggling to recover from a costly two-year delay to its double-decker A380 super-jumbo program while funding development of the A350, its answer to the 787's runaway success in the lucrative market for long-range, mid-size planes.

The A380 production setbacks have wiped about 5 billion euros ($6.6 billion) off profit forecasts for 2006-10.

Among issues still to be resolved is the manufacture of carbon-composite A350 fuselage panels, which Gallois wanted to base outside Germany, the German official acknowledged -- a proposal that DaimlerChrysler so far has rejected.

The metal fuselages on current Airbus models are made at a plant in Nordenham, Germany, where 2,100 workers are employed. But the A350's composite panels could be produced more cheaply at Airbus facilities in Spain or by suppliers outside Europe, some analysts say.

French Prime Minister Dominique de Villepin said Tuesday that Airbus was seeking to cut about 10,000 jobs, or almost 18% of the workforce, as reported by the French financial media over recent days.

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