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Airbus cuts reignite debate over state influence

Airbus cuts reignite debate over state influence
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First Published: Tue, Mar 06 2007. 01 12 PM IST
Updated: Tue, Mar 06 2007. 01 12 PM IST
PARIS: The French state is only a “silent” partner in Airbus but with public anger swirling over thousands of job cuts, there are calls for it to wield greater influence in the aircraft maker’s boardroom.
The French government is one of the biggest shareholders in Airbus’s parent company, the European Aeronautic Defence and Space company (EADS), and with presidential elections just weeks away the clamour is growing.
French Prime Minister Dominique de Villepin said on Monday that the state would be prepared to participate in a capital increase of EADS, together with other shareholders.
Several French regional authorities are suggesting that they could become shareholders, injecting fresh funds, pointing to the recent entry of German regions into the company -- an idea backed by left-wing presidential candidate Segolene Royal.
Francois Bayrou, the centrist presidential candidate currently rising in opinion polls, has called on private investors in EADS to take their “responsibilities” seriously and for a “new balance” between public and private shareholders.
But increased state influence is anathema to EADS’s management and to the investment community.
“I would prefer a company without state involvement,” EADS co-chief executive Thomas Enders said in an interview published on Monday.
For Pierre-Antony Vastra, analyst at IXIS-Securities, an increase in the stakes owned by public bodies risks turning EADS into an “aeronautical Fourth Republic,” a reference to the postwar French political era when infighting between competing interests rendered decision-making notoriously difficult.
EADS is currently owned by a mixture of private and public French and German investors, with French media group Lagardere, German-US automaker DaimlerChrysler and the French state each owning 15 percent.
Lagardere’s stake is due to fall to 7.5 percent from July, while a consortium of investors including German states owns a further 7.5 percent. Most of the rest is freely traded on the stock market.
But according to a shareholder pact signed at EADS’s inception in 2000, and falling in with demands of the market, it is Lagardere and DaimlerChrysler who wield the most control over management decisions.
The announcement last week that Airbus is to cut 10,000 jobs, including 4,300 in France and 3,700 in Germany, has highlighted how little influence governments have.
So increased state influence over EADS may become a reality with DaimlerChrysler and Lagardere currently reducing their stakes and so far ruling out pumping in any fresh capital.
EADS is set to go cap-in-hand to the markets soon in order to raise some of the estimated 10 billion euros (13 billion dollars) needed to develop its new long-distance A350 aircraft.
This could take the form of selling bonds convertible into EADS shares or a straight capital increase which could dilute the stakes of the current shareholders if they do not sign up to their alloted amount of new shares.
Both in Paris and Berlin there is a desire to preserve a group of “core” shareholders which, according to French Economy Minister Thierry Breton, has the “advantage” of protecting EADS against any unwelcome takeover approach.
“For the moment we should not accept any other shareholders within the EADS shareholder pact,” German Chancellor Angela Merkel said on Monday, referring to the recent rise in the stake of state-owned Russian bank Vnechtorgbank to just over five percent.
Other investors may also be prepared to invest in EADS, most notably the Gulf state of Qatar.
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First Published: Tue, Mar 06 2007. 01 12 PM IST
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