EADS' new procurement procedures promise to significantly alter the supplier set-up in Europe. First, it may fuel further consolidation of the first-tier supplier industry. Second, EADS' larger contracts will incorporate more elements and hand over greater responsibility to fewer companies. On the other hand, the aerospace giant is expected to demand ever higher performance from its suppliers and greater quality in what it buys.

And from a purchasing point of view: "We expect a lot more clarity in communications from EADS, much more of a focal point approach," says Graham Thornton, director of business development for TRW Aeronautical Systems - a key supplier to Airbus and Eurocopter, among other EADS business operations. But a big question remains. How will national interests, previously evident to many in the supplier corps, play out under the new procurement rules behind the scenes where engineers hold sway over technical criteria?

"Greater visibility of national interests would be useful," says Thornton. "Previously, there were nationalistic overtones. Now tell us what's changing."

Concerns about national interests, particularly about their role at Airbus, stemmed in part from the responsibility of different countries for specific aircraft sections. Too often, some suppliers allege, national Airbus companies tended to award contracts to their own countrymen.

Suppliers say they received "some indication" about the path that lies ahead for procurement at a recent annual suppliers meeting hosted by Airbus in Disneyland Paris. But the entire picture has not yet been made available.

What is known, however, is that suppliers will encounter "a lot more visibility of our performance across the different sectors of EADS' business. You will have to perform well across all sectors of EADS," Thornton says.

TRW concedes it is working hard at the moment to resolve two "significant problems" with current Airbus contracts. Michael Williams, director of TRW Aeronautical Systems' hydromechanical cluster, says he was assigned to his job last summer specifically to handle problems of late and incomplete deliveries and high rejection rates. "The problems we were encountering - and are still encountering, in particular from our two French sites - were for the A330-A340 line," Williams says.

While resolving the issues at hand is TRW's priority now, the prospect of ultimately exerting its full systems capability in EADS' future procurement vision - instead of supplying "individual items" - is not lost on TRW. "I think this is the role we would like to play in the future. It is clearly important to us as we move forward for work on the A340-600 and A380," Williams says.

EADS' new route marks a departure from the way in which it has previously done business. Other aerospace companies such as Boeing and Canadian regional aircraft manufacturer Bombardier, however, have already pioneered similar strategies, points out Paul Edwards, director of the London office of aerospace and defence investment bank Quarterdeck Investment Partners. "With regional jets, there are maybe 12 major suppliers, for instance."

The question then becomes: Who is big enough and fit enough to take on contracts of the size EADS and its companies could offer, built around such major programmes as the A380? "That's where the critical aspect comes for Europe," Edwards says. Possible scenarios might include the acquisition of the European supply base by US mega suppliers which would then "give strong parental backing". Another calls for the European supplier base to consolidate around itself, but, Edwards says: "There is a fundamental sticking block - everyone's a buyer and not a seller."

Most affected would be suppliers below the level of companies such as Smiths, Thales or TRW, which must consider whether to sell their own niche company, buy someone else "or try to go global", Edwards says.

Major changes in the supplier marketplace are likely to take five to 10 years to complete, Edwards says. "But something is being felt now."

Source: Flight International