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  • IN FOCUS: Toulouse reins in EADS governance shake-up

IN FOCUS: Toulouse reins in EADS governance shake-up

EADS chief executive Tom Enders has consolidated his grip on the Airbus parent with the formal creation of a single operational headquarters in Toulouse, at the expense of Munich, as part of a new governance structure that dramatically reduces the shareholdings, and influence, of the French and German governments.

Enders, who took over last summer on Louis Gallois's retirement, has long championed Toulouse as the site for a single corporate headquarters. In doing so he sought to sweep away the last vestiges of a system of equally shared management dictated by the Franco-German political deal that created EADS a decade ago from national aerospace champions. The company had already ended the practice of appointing French and German co-holders of top management positions; Enders had been co-chief executive with Gallois until 2007, when he effectively stepped down to lead only Airbus as part of that reform.

Airbus Toulouse factory Airbus


Dominant division Airbus is already based in Toulouse

When the headquarters is fully operational on 1 September, some 116 jobs currently based in Paris and 75 in Munich will have been transferred to Toulouse, which will host some 500 positions, including the integrated functions of EADS and Airbus human resources and finance and a part of shared services, as well as other key steering functions. The group will keep around 250 service and support functions in Paris and more than 300 in Munich.

Enders, who described the agreement on Toulouse of French and German works councils as "a key milestone to further integrating EADS", has had a tumultuous nine months at the helm of EADS. His preference for Toulouse was made clear early on in his tenure, when he and new chief finance officer Harald Wilhelm set up their offices in the French aerospace capital and directed other senior executives to look at ways to consolidate there.

Apart from the obvious operational efficiencies of focusing senior management activity in the main location of the dominant Airbus division, Enders' choice of Toulouse was seen as a politic manoeuvre to ensure Paris remained comfortable with the company being led by two Germans. Previously, as in the case of Gallois and his chief financialofficer Hans-Peter Ring, those roles would have been split between the two nationalities.

But a bold proposal to resolve longstanding questions over EADS's weak position in military aerospace by merging with the UK's BAE Systems was rebuffed by Berlin. German chancellor Angela Merkel is believed to have personally shot down the idea, which had gained some traction in Paris and London but drawn fire from non-state shareholders.

Far from being weakened by the failure of such a major initiative, however, Enders rapidly turned the situation to advantage by driving successfully for a new governance deal. Agreed in December, the new deal will see the direct and proxy shareholdings of the French and German states whittled down to 12% each, from 22.45%, while the Spanish government's holding is reduced to 4%, from 5.45%.

Critically, as of the formal adoption of the new governance pact on 27 March, no shareholder holds a veto over management decision-making.

German proxy holder Daimler has sold all but 7.5% of EADS to a consortium of German banks, and is looking to further divestment. Lagardère, which has shared with the French government the ownership of France's 22.45%, had as of 9 April sold its entire 7.4% holding – some 61 million shares – for €2.283 billion. The buyers were qualified investors and EADS itself, which spent €500 million as part of a share buyback scheme approved by its new board of directors, which was selected at the 27 March extraordinary general meeting which adopted the governance pact.

That buyback scheme will cover up to 15% of the group’s shares, for up to €3.75 billion ($4.8 billion) at up to €50 per share; shares bought through this mechanism will be retired. The move, supported by a cash pile that at end-2012 stood at €12.3 billion, should help to maintain a steady share price as the Daimler, Lagardère and French state holdings come onto the market.

  • This article was updated on 10 April
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