Trying To Untangle Wires

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Streiff is hoping to address these issues head-on, not just because he is new both to Airbus and to the aerospace industry (he's a manufacturing expert from the French glass company Saint Gobain), but also because the company is facing its biggest crisis since its founding in 1970. The company has slashed its delivery schedule for the A380 from one plane in 2006 to zero, from nine planes in 2007 to one, and from 25 planes in 2008 to 13. That's a significant setback for the behemoth's main customers, including Emirates and Singapore Airlines, which now must revise their expansion plans. They are expected to demand compensation and may even cancel their orders. Emirates, the single biggest customer with orders for 45 planes, said it is "reviewing all options."

Streiff's revitalization plan is supposed to make Airbus a more reliable and efficient partner. It seeks to cut two years off the time it takes to develop a new aircraft, boost productivity by 20%, and slash €2 billion in manufacturing costs annually. The company will negotiate the cuts with union and political leaders in its 16 different manufacturing locations in four countries, but that is already creating turbulence. French and German politicians and union leaders quickly weighed in with objections. In Toulouse, Airbus executives blamed Hamburg for the delays. Hamburg city officials, in turn, blamed EADS management in Munich.

With so many clamoring stakeholders, any would-be Airbus reformer has his work cut out. EADS co-ceo Thomas Enders met with Germany's Economics Minister, Michael Glos, last Thursday, and promised him that Airbus wasn't looking for mass layoffs of blue-collar workers, but for administrative streamlining. His reassurances didn't stop calls in Germany for the government to take a big stake in EADS to counterbalance the 15% owned by the French state. (The two other big owners are Germany's DaimlerChrysler and France's Lagardère group, both of which reduced their shareholdings this year; Britain's BAE is currently selling its 20% stake in Airbus to EADS.) Giovanni Federico, a professor at the European University Institute in Florence, Italy, says, "Because of the politics, Airbus certainly won't be able to carry out the sort of cost-cutting that a U.S. firm would now do." Indeed, archrival Boeing has cut more than 50,000 jobs over the past eight years.

The 555-seat, double-decker A380 is not just another airplane. It is one of those bet-the-company ventures, so beloved by the airline industry, which either succeed spectacularly — as the Boeing 747 did — or risk sending the whole firm into a tailspin. Mechanically at least, the A380 works: Airbus has been conducting successful test flights for over a year. Horstmann, the Munich bank analyst, reckons there's an 80% chance that Airbus will be able to work through this crisis and bounce back in a couple of years. "But there is a danger it'll get sucked into a vicious circle of job cuts, sinking morale and political infighting," he worries.

Already stretched by the A380 crisis, Airbus must decide whether it has the money and management to proceed with developing the 330-seat A350 in a bid to catch up with Boeing's new 787 Dreamliner, or focus elsewhere. Steve East at Credit Suisse First Boston in London, who downgraded EADS stock to "underperform" last week, thinks the company will cancel the €8 billion A350 program altogether.

It's all a huge change from the triumphalism at Airbus headquarters — and European capitals — two years ago, when the firm outsold Boeing for the first time. Back then, Airbus was hailed as a uniquely European archetype for competing in heavy industries. After all, no single country in Europe has the resources to develop a world-beating aircraft manufacturer on its own. The core notion of cooperation is still valid, says James Foreman-Peck, a professor at Cardiff Business School who specializes in European industrial policy, "but these days, Airbus just confirms Anglo-Saxon prejudices that governments waste large amounts of taxpayers' money even when they have a good idea." Untangling Airbus' wiring will prove plenty tough, but untangling its management snarls may be the hardest task of all.