Andrzej Jeziorski/MUNICH

IT HAS BEEN a bad year for Daimler-Benz Aerospace (DASA). After having hopes of profits dashed by the low dollar exchange rate, leading to a record DM1.6 billion ($1.14 billion) first-half loss, the company has now raised the axe over nearly 9,000 jobs and at least three sites.

This comes in addition to the already drastic restructuring programme set in motion at the end of 1993, under which 16,000 jobs were to go between 1993 and the end of 1996.

Whether and where the blade will actually fall is now a subject for heated negotiations with politicians and trades unions - which, have been muttering about possible strikes in reaction to the proposals. A decision on the details of the restructuring plan is expected towards the end of November.

The plan, which has been drafted with the help of consultancy McKinsey, under the so-called "Dolores" (dollar-low rescue) study, caused a stir when details of an interim report predicting 15,000 job losses were leaked to the German press in August (Flight International, 23-29 August).

Excluding Eurocopter, and Fokker - itself dangerously in the red - DASA intends to cut employment in its Aircraft and Propulsion Systems groups from 30,551 at the end of 1995, to 22,505 at the end of 1998. DASA overall (again excluding the aforementioned companies) will lose 8,822 out of 49,093 employees in the same period.

The company further plans to sell its engine-component plant in Preissenberg, as well as the Airbus component factory at Laupheim and the Speyer plant, which manufactures parts for both Airbus and Fokker. The work from these plants "...can be undertaken more economically... by other companies outside Germany", says DASA, adding that it also hopes that this will lessen dollar dependency.

Although DASA chief executive Manfred Bischoff has not revealed to where work would be moved, DASA has recently set up a working group with Italy's Alenia on closer co-operation between the two companies, and Alenia president Fausto Cereti confirms that this will involve the transfer of some Airbus component work to Italy. Work is also expected to be handed to companies, in the Far East and to British Aerospace in the UK.

The company is also considering withdrawing from some of its plants in eastern Germany, including the engine production site at Ludwigsfelde, near Berlin, and the Airbus site at Dresden. Bischoff is careful to stress, however, that the withdrawals will be carried out with an eye on "social responsibilities", hoping to salvage jobs at these locations under a new owner, as has been done at the former DASA sites of Lemwerder and Neuaubing.

These measures, are intended to save hundreds of millions of marks a year and return the company to long term profitability by the end of 1998, even assuming, a worst case dollar exchange rate of DM1.35 during that time - in fact the rate has recently hovered closer to 1.4 and is expected to rise.

DASA repeated calls for political support to eliminate "competitive disadvantages in the world market, in particular with respect to US competitors". So far, the company says, " substantial progress has been made" to compensate for the support the US industry receives, despite the "inadequate" civil-aerospace support package the Government has produced, which offers DM600 million over four years to help industrial research and development.

One of the major questions still unresolved concerns the future of Fokker, which, despite DASA's insistence that it was right to acquire a majority stake in a leading regional-jet manufacturer, has become an undeniable millstone around the neck of a company already struggling to stay afloat.

In August, Fokker revealed a record DFl651 million ($415 million) first-half loss - exceeding the company's total loss for 1994. Since then, DASA has been negotiating with a reluctant Dutch Government over financial aid amounting to some DFl2 billion, without which Fokker chief Ben van Schaik says the company will die.

DASA's new plan does not include proposals for Fokker, the future of which Bischoff says will have to be decided with the Dutch authorities, although he does add that "...every sector within DASA must be able to compete and operate as an economic entity by itself".

While declining to say how much the restructuring plan will cost, Bischoff says that the figure is likely to exceed DM500 million, while the operating loss at the end of the year could be DM2 billion.

Although the dollar exchange rate has been consistently given, as the key, driving factor in the plan, and has undoubtedly caused substantial losses for a company, which sells in dollars but suffers costs in marks, it is widely believed that DASA was overdue for such measures. It is now performing a necessary adjustment of capacity, such as that already carried out by British Aerospace, to put itself in a position to play a useful role in a future consolidated European industry.

Despite a depressed civil sector and a military sector hit by changes in the global political landscape in recent years, some analysts feel that DASA has been slow to make necessary cuts because of the potential political consequences. The German Government was intimately involved in the foundation of DASA, as well as being the key customer for its defence products.

It has thus taken a crisis to trigger actions, which would almost certainly have been necessary, sooner or later.

Source: Flight International