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Ring steers EADS through financial minefields

Steering EADS through a succession of financial minefields over the past decade has been its veteran chief financial officer Hans Peter Ring. The 59-year-old German, who came through the accountancy ranks at EADS's predecessor company DASA, has had the dual task of selling a complex new business to the financial markets, as well as overseeing an equally complicated internal accounting structure melded from a number of legacy systems.

The way shares in EADS trade - like its shareholding and management structure - is a throwback to its origins. Just under half its equity is available to buy and sell on three stock exchanges: Frankfurt, Madrid and Paris.


Ring: "We have to deal with three regulatory environments". Picture: EADS 
Although Ring admits the decision to float in all three home countries was "political", there are few drawbacks. "We have to deal with three regulatory environments, but the procedures are more or less the same in all three," he says.

Although there are no plans to offer shares on other countries' exchanges, it is possible that more of the founding shareholders' equity - just over half the company's value - might be made available to the markets at some point. EADS would be comfortable dealing with a free float of more than 50%, says Ring, but this is a decision for the controlling shareholders.

Ring manages the financial side of the business through a finance leadership team which comprises the chief financial officers from all the divisions, each of whom are responsible with their chief executives for their business's profit and loss. EADS's board also has the say on major investment decisions. "It's an integrated approach," he says. "We are targeting them for the right level of performance."

One of his biggest tasks is supervising the company's drive to reduce costs as part of its so-called Power8 programme. A four-year "Power8 Plus" initiative was launched in 2008 and extended from Airbus, where it started, to the whole of EADS. After achieving cost savings "very close" to its 2010 €2.1 billion ($2.6 billion) target by last year, management have undertaken to deliver another €1.35 billion of costs from Airbus and €350 million from the rest of the business by 2012.

The weakening euro is helping after a period in which its strength against the dollar was one of EADS's biggest financial headaches (see chart). Airbus is the most exposed business as virtually all airliner transactions are in dollars. After a huge effort to "dollarise" its cost base, around half of the airframer's outgoings are now in the US currency, "so we have a natural hedge of 50%", says Ring.

However, EADS is keen to increase this "through new programmes, particularly the A350 which will have a large part of its costs delineated in dollars" from 2013. "We will do it by improving our footprint on the manufacturing side by asking suppliers to go into low-cost or dollar countries or doing it ourselves", says Ring. In five years' time, Ring wants the proportion of EADS's costs paid in dollars to be "significantly north of 50%".

Ironically, however, it is the economic tribulations of Europe - which have boosted confidence in the dollar and weakened the euro in recent months - that could go a long way to ensuring this European company meets its financial targets in the short term.

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