EADS hints at "harsh" cuts to Cassidian

London
Source: Flightglobal.com
This story is sourced from Flightglobal.com

EADS boss Tom Enders has hinted at “harsh measures” – including job cuts – at the Airbus parent’s defence division, amid a planned reorganisation.

The remarks come as company management works out the details of a restructuring, announced in August, that will combine EADS’s Cassidian defence and Astrium space units.

In an interview with Germany’s Sueddeutsche newspaper, Enders blamed the defence unit’s financial problems on a lack of orders – especially in Germany where, he suggested, jobs and facilities are at risk. Export orders, he added, do not “fundamentally change” that picture.

He promised details would be revealed in December.

EADS declined to comment, but said the Sueddeutsche story accurately reflected Enders’ remarks.

Cassidian has long been the poor sibling to EADS’s Airbus, Astrium and Eurocopter divisions. While the booming civil aerospace market has kept Airbus growing strongly, and both Eurocopter and Astrium remain leaders in their markets, the defence business has seen minimal growth.

Weak defence spending in Europe – especially in Germany – has been a drag on Cassidian, which is also heavily exposed to a Eurofighter programme that is almost totally reliant on exports.

Much of Cassidian’s footprint is in Germany. This is a legacy of the Daimler aerospace division that formed much of the German contribution to EADS when the business was created by merging French and German national champions.

This first hint of drastic cuts at Cassidian follows Enders’ August announcement that EADS – originally European Aeronautic Defence and Space – would be renamed as Airbus, to leverage the global branding power of its civil aircraft division.

When the new name comes into force sometime next year, Eurocopter will carry on much as it is, as Airbus Helicopters. However, Astrium and Cassidian will be joined as Airbus Defence & Space.

In addition to working out details, EADS insiders expect the legal issues associated with changing the company’s divisional structure to delay a formal shift to the Airbus name to the second half of 2014.

One thing that is clear, however, is that EADS has abandoned its Vision 2020 plan, which sought to rebalance the group away from its excessive reliance on Airbus.

The combination of the civil aerospace boom and defence market weakness has made any rough 50:50 revenue balance an unrealistic goal. Airbus civil sales continue to account for a heavy two-thirds of EADS’s €56 billion ($77 billion) annual revenue.

The prospect of sharp cuts at Cassidian stand in contrast to Enders’ Autumn 2012 surprise, when he proposed to merge EADS with one-time key shareholder BAE Systems.

The tie-up would have created the world’s biggest aerospace group, and allied Cassidian with the UK-headquartered defence-focused group, which is also a major player in the USA.

The merger was ultimately quashed by German government fears that French and UK interests would dominate a BAE-EADS alliance. But the experience of seeing management overruled so publicly seemed to galvanise critics of an ownership structure that gave Paris and Berlin so much control over the company.

Enders used that momentum to engineer a new ownership structure that essentially turned EADS into a normal, publicly-listed company. He ended the French and German states’ direct or proxy control of dominant shareholdings, and formally freed management of political interference.

Changing the company name to Airbus is the latest chapter in the overhaul of EADS. If Enders and his top team want to make sharp cuts in Germany, it may also be the first real test of this new structure.