Executive shake-up at EADS and Airbus leaves mercurial Frenchman in control of both companies’ destinies
One view of the accord which saw a senior executive team finally installed at EADS and Airbus just over a week ago is that it was a muddled compromise after a nine-month Franco-German wrangle.
The deal has created a convoluted reporting structure under co-chief executives Tom Enders and Noel Forgeard designed to ensure that power is balanced across the Rhine. Not only has the world’s number two aerospace company got French and German co-chairmen and co-chief executives, it now has co-chief operating officers (COO): former chief financial officer Hans Peter Ring and Jean-Paul Gut, who will continue to be responsible for marketing and EADS operations overseas.
The reporting lines on the executive board are byzantine. Each COO reports to a different chief executive. Airbus’s new German chief executive Gustav Humbert reports to Forgeard, as does French head of the space business Francois Auque. The German head of defence and security, Stefan Zoller, reports to Enders as does his counterpart at the elevated Eurocopter division, Fabrice Bregier. The Spanish head of military transport, chief executive of EADS North America – a US citizen – and Finnish head of human resources report jointly to both chief executives.
However, despite the head-spinning complexity of the hierarchy, there is a counter-argument that EADS now has a structure which will allow it to function as a single entity with a more streamlined organisation than it had under its first co-chief executives, Philippe Camus and Rainer Hertrich.
The fusing of senior management into a four-man CEO/COO team is seen as a positive development by many, with Deutsche Bank welcoming the promotion of Ring, regarded as having done a good job in persuading the international investor community to put their money into EADS. “Ring is well liked by equity investors and increasing his influence is likely to be seen as a positive step,” it says.
There seems no doubt that Forgeard will remain the power behind Airbus – which EADS owns with 20% partner BAE Systems and which accounted for almost two-thirds of EADS’s revenues and nearly four-fifths of its profits last year. Humbert, the first non-Frenchman to head Airbus, was for years Forgeard’s number two and is an able technocrat who does not have his predecessor’s ambitions or charisma. Forgeard has also consolidated his position by becoming chairman of Airbus’s shareholders’ committee.
Says one London-based analyst: “It’s hard to think Forgeard will relinquish much control of Airbus, although as co-chief executive he will find his time being taken up with other things.” The danger, he says, could be if Forgeard is unable to let go of decision-making at Toulouse. “I think we’d know by now if there was some problem in the working relationship between Humbert and Forgeard. My concern is Forgeard being able to delegate – the potential for managers who get promoted to meddle in their old businesses is substantial and could be to the detriment of Airbus and other EADS businesses,” he says.
However, others think Forgeard’s appointment will bring Airbus and EADS’s corporate office closer together. Under the old regime, Airbus was run almost entirely autonomously, with Forgeard nominally responsible to Hertrich in Munich under the Franco-German cross-reporting set up.
Says one analyst: “Forgeard was so fiercely independent at Airbus that his move to EADS corporate will inevitably lead to smoother relations with head office, and EADS having more control over Airbus, which is a good thing.” So where does this leave the Germans? The nine-month dispute was prolonged by EADS 30% shareholder DaimlerChrysler’s refusal to cede to what it saw as the French side’s unreasonable demands (the government and Lagardère own 15% each).
Like Forgeard, Enders should keep loose reins on his former empire, Munich-based Defence & Security Systems, now being run by one of his former lieutenants, Zoller. Enders also takes overall responsibility for Eurocopter, EADS’s only other real global brand, although the elevation of the helicopter business into a division in its own right gives France – through the highly regarded Bregier, who had been tipped to head Airbus – another key scalp.
Responsibility for EADS’s smaller businesses has also been relocated. Sogerma and EFW now come under the wing of Humbert at Airbus, while ATR, which EADS owns jointly with Finmeccanica, and general-aviation aircraft maker Socata will report directly to Ring.
One of Enders’ and Zoller’s biggest challenges will be dealing with the French defence ministry. While their other main customer, the UK Ministry of Defence, has no qualms about dealing with Munich directly or through EADS’s London office, its counterpart in Paris expects to do business with one of its own. Says one analyst: “They haven’t made it clear how this will work. It has always been recognised that the French defence ministry relationship would be with a Frenchman, even if nominally a German is in overall charge of defence.” Under the old regime, top-level dealings with the French defence community was one of Camus’ key roles. With the new set up, Forgeard is likely to find himself having to schmooze French politicians and top brass on a regular basis.
According to another London-based analyst, the “Germans appear to have won, but they haven’t”. He adds: “The Germans can take satisfaction at not being dominated by the French, but the French have what they want – continued control of Airbus and EADS.”
MURDO MORRISON & HELEN MASSY-BEREFORD/LONDON