Spirit Aerosystems Inside Track at Airbus? UPDATE 3 and 4
UPDATE 4: Canada Says "Thank you Sir. May I have another?"
It seems that Spirit Aerosystems is owned by Canadian private equity firm Onyx Corporation...so saith Scott Deveau of the National Post.
The plot thickens, people. That makes two Airbus deals with Canadian firms that have gotten impaled in the briar patch of European politics. The first was the Pratt & Whitney engine program for the A400M.
That suggests that it really WAS all about the money, and maybe it was Spirit who left Airbus waiting at the altar....Jeff Turner of Spirit said "We put key resources into due diligence for the Airbus UK and German sites . . . In the end we just couldn't close a business case that met both our customer requirements and our shareholder requirements."
UPDATE 3: It's All About The Money, Stupid.
Forbes reports this afternoon that the German government owned KfW Bankengruppe is going to grant credits worth 3-400 million euros to OHB's MT Aerospace unit for the German part of the Great Airbus Power8 Selloff That Ain't.
UPDATE 2: As it happens, my instincts were pretty good on this subject. Bloomberg has this from the Great Satan himself:
``This is a major step backwards,'' said Richard Aboulafia, vice president of Teal Group, a Fairfax, Virginia-based consulting company.
``Airbus is about crossing borders, not erecting them for national solutions. In rejecting Spirit, they're rejecting the technology and risk-sharing tasks needed to bring products to market, especially the A350.''
Spirit has more technology and financial resources than any of the buyers chosen, Aboulafia said. Latecoere and GKN have ``good reputations, but they've never done projects of this scale. MT was the biggest German company they could find to do the job, but that says very little.''
UPDATE 1: The BBC is calling the tape this morning as an all European sweep-GKN, Latecoere and MT Aerospace as preferred bidders for the Airbus spinoffs at Filton, Meaulte, Ste. Nazaire Ville, Nordenham, Varel and Augsburg.
The consensus of reports this morning suggests that that is the case, rather than Spirit Aerosystems being an important part of the process as previously reported.
It thus demonstrates that folks in the dollar zone are not going to be building Airbus structure anytime soon.
It raises some interesting questions.
What was the "leak" about Spirit Aerosystems in the German press all about, and the media reports that Filton would immediately lose 1,000 jobs if Spirit got the nod?
And were they ever in the hunt at all, or were Spirit a foil just as Pratt & Whitney Canada was, when the A400M engine program was being shopped?
If I had to hazard a guess it may well be, if I am to be permitted a small pun, a composite of things.
Perhaps what the European labor unions were demanding of Airbus was not doable for Spirit Aerosystems, and there was thus no opportunity to make the needed changes that would have assured long term profitability.
One could also surmise that the price the plants were offered at wasn't good enough to offset the cost of operating them within the limitations that were to be demanded.
And maybe that means that what Airbus is selling really isn't a very good deal.
At this juncture, it seems likely that all Airbus wants to do is transfer the ownership and the problems associated with their facilities without transferring the power to make important decisions about how the plants are run and what they make, as well as where they make it
That suggests that Power8 is, indeed, a paper tiger, and that the dollar-euro split is more of a sound bite and a talking point than a real issue.
It also suggests that Airbus does not have the stomach for implementing the hard measures that are needed if they're really in the business to make money. If I still had it, I'd reprint the term paper I wrote in 1993 wherein I made the point that Airbus is a pan European jobs and technology development program that was never intended to make money
I believe this is a press release from EADS, reproduced from JEC Composites
EADS and Airbus have selected Latécoère in France, GKN in the UK, and MT Aerospace in Germany as preferred bidders for the sites of Méaulte and Saint Nazaire Ville in France, the Filton wing component and sub-assembly manufacturing facility in the UK, and Nordenham, Varel and Augsburg in Germany.
The EADS Board of Directors has authorized the management of EADS and Airbus to enter into negotiations with the preferred bidders on remaining issues and the required final due diligence, with the target to achieve a final agreement as soon as possible.
Substantial progress on the share purchase agreement is expected in the first quarter of 2008. The EADS Board sees this decision as a clear commitment of the management to the Power8 targets.
The partner selection for Filton will allow for an outright sale of the manufacturing part of the site to GKN. For the French and German sites, the agreement with Latécoère and MT Aerospace will take the form of joint ventures, in which Airbus will retain a substantial minority shareholding. Airbus has the option to withdraw completely after three years.
The merit of the joint venture structure is to empower Airbus to closely monitor the transition during the period of A350 XWB development and convergence of definition, while reducing substantially EADS’ cash outlays.
Under the joint venture agreements, Airbus does not intend to interfere in the majority shareholder’s management of each plant. The Airbus plants targeted for divestment employ a total of 7,400 employees, and represents € 1.4 billion of Airbus’ cost base in 2007. EADS Defence & Security's plant in Augsburg employs 2,000 employees and represents around € 450 million of its cost base in 2007.
About 70 percent of the Augsburg plant's revenues come from Airbus. "The ongoing divestment of sites and the building of a network of partners for Airbus allows EADS to focus its resources on core activities. It is a way to optimise Airbus' industrial set-up in the frame of the extended enterprise.
At the same time, it helps EADS to reduce financing needs in a period strained by conjunction of costly programmes and weak dollar uncertainty," said EADS CEO, Louis Gallois. “This decision is an important milestone for Airbus' new strategy and Power 8 programme. We will work to progress and conclude the negotiations as swiftly as possible. At the same time, we can now begin to establish long-term partnerships with three first tier suppliers for the A350 XWB, who will share workload, investment, risk and future benefits with us. The bidders will now be invited to the A350 XWB development plateau," said Airbus President and CEO Tom Enders. “This process will generate strong tier one partners for Airbus, and will allow the sites to further develop and acquire the required technologies to remain competitive in the future.”
The transactions are expected to be closed in summer 2008, when the sites are effectively transferred to the new owners. Meanwhile, these sites will continue to produce their parts for the existing Airbus products (A320 Family, A330/A340 Family, and A380) for which Airbus has an order book of some 3,000 aircraft.
The finalisation of transactions is subject to agreements on terms and conditions (such as governance issues, exit mechanisms, etc.), and the demonstration of satisfactory financing structures and backing by the buyers.
The Power 8 programme is a comprehensive improvement programme designed to reinforce Airbus' competitiveness in the face of the weakening dollar. It will enable Airbus to become more efficient and productive through a complete turn-around of the company. This involves becoming more integrated, with simpler processes, implementing lean manufacturing, shortening development times and reducing the number of suppliers.
A350 XWB work packages will now be allocated to the future tier one partners in Filton, Meaulte and St Nazaire, as well as Nordenham, Varel and Augsburg. The pace and schedule of final negotiations with the preferred bidders at this stage is consistent with the ongoing A350 XWB development timeline. The site divestment process for Laupheim continues in parallel.
The original story I posted last night:
Rumors are swirling ahead of the announcement soon to be made concerning disposition of Airbus' plants that are part of the Power8 restructuring platform that's still to show any significant results.....where was I? Oh yes....now I remember.
The Economic Times of India is calling this one for Spirit Aerosystems of Kansas based on an article in Handelsblat, a German business daily.
Deutsche Welle is also saying pretty much the same thing, saying that four plants will go to Spirit, one of which is at Filton in the UK-thus breaking the British monopoly on Airbus wings.
Spirit's got a long lead in large scale CFRP composite technology, and they've also got a low cost structure in the dollar zone which makes supplying subcomponents to Airbus an eminently sensible idea. I wonder whether Louis Gallois will continue to say "No A350 structure built in the States! No sirree! Not on your life, this is a European aircraft!"
Where this all gets interesting is the opposition to the sale coming from the Airbus union members who are on record uniformly opposing the plan.
While my sympathies are always with the tin bashers and rivet pounders and tank rats who do all the work I can tell them from hard experience in just such a position back in 1992 that there are things they need to be doing. The worker with a functioning sense of self preservation will skip the vacations in the Canary Islands, forget the big screen teevee, and put a set of rings and a valve job in the Renault instead of buying a new ride.
That person will also work all the overtime they can get and bank every euro that comes their way and start thinking about what life after Airbus will look like-because it's coming, boys, sure as a heart attack.
We have an acronym in the aerospace industry here in the states that should be of interest to soon to be former Airbus worker bees, and I commend it to their use and enjoyment.
It is BOHICA, which stands for Bend Over, Here It Comes Again.