Sarkozy pushes to end 'two-headed' EADS management

Posted in Europe | 04-Jul-07 | Author: Nicola Clark| Source: International Herald Tribune

Thomas Enders, left, and Louis Gallois, the co-chief executives of EADS.

PARIS: President Nicolas Sarkozy of France is pushing hard to secure an agreement this month to streamline the "two-headed" management structure of European Aeronautic Defense & Space, the parent company of Airbus, people with knowledge of the discussions said Tuesday.

But while there is a consensus among EADS's biggest private shareholders, DaimlerChrysler and Lagardère, that the company should abandon its dual, French-German management in favor of a single chairman and a chief executive, sharp disagreements remain over who should hold the top leadership posts, these people said.

According to one person close to the French government - which controls 15 percent of EADS - Sarkozy has suggested that Louis Gallois, the French co-chief executive of EADS and chief executive of Airbus, assume responsibility for the day-to-day management of EADS, while his German counterpart, Thomas Enders, would step down. Meanwhile, Rüdiger Grube, a German, would become sole chairman of the group, said the person, who asked not to be identified because the negotiations are continuing. Grube now shares the chairmanship with Arnaud Lagardère, head of the eponymous French media and military conglomerate.

A spokeswoman for the French Finance Ministry declined to comment Tuesday. But Ramzi Khiroun, a spokesman for Lagardère, insisted that there was currently no formal reorganization proposal on the table and that it was too early to speculate about which individuals would be appointed to manage the company.

"We are in discussions with the Germans to end the two-headed structure," Khiroun said, but added that the industrial shareholders and the governments "share an understanding that there needs to be a perfect French-German equilibrium" in the executive suite.

The question of abandoning the dual-management structure is a perennial one at EADS, which was created in 2000 after months of painstaking negotiations designed to balance the interests of France and Germany in the group. The French state and Lagardère together hold a combined 22.5 percent stake in the company, an investment that is balanced by DaimlerChrysler, based in Stuttgart, which owns 15 percent of the shares but controls 22.5 percent of the voting rights.

In the wake of a management crisis set off last summer by major delivery delays to the Airbus A380 superjumbo jet, DaimlerChrysler and Lagardère agreed in principle to do away with the cumbersome structure, but a German proposal to make Enders the chief executive was rejected by the French. In 2005, Jacques Chirac, then president of France, proposed a Frenchman for the post, Noël Forgeard - a proposition that was rebuffed by the Germans.

Now, Sarkozy is eager to reach a new deal in time for a July 16 French-German summit meeting at Airbus headquarters in Toulouse, France.

But it should perhaps come as no surprise that his suggestion is once again ruffling feathers at the company's German headquarters in Munich.

"What are the French trying to achieve by shooting at the German CEO right now?" said one person close to the company, who asked not to be identified because of the sensitivity of the situation.

Alexander Reinhardt, a spokesman for EADS, said that Enders had no plans to step down. "He is working on his business tasks at full throttle," Reinhardt said.

At a conference on military issues in Berlin on Tuesday, Enders dismissed reports that he was about to lose his job, Bloomberg News reported.

"The excitement in the media at the moment about the management structure of EADS doesn't impress me," Enders was quoted as saying.

"I'm doing my job, a very active job, that is as you know with operative challenges," he added. "I'm taking care of the further integration of the company. I'm also taking care of Power8 and the restructuring of Airbus. That's what the Anglo-Saxons call a tall agenda. With this, I am for the time being sufficiently busy beyond July 16."

A spokeswoman for Germany's Economy Ministry, meanwhile, declined to comment, describing the matter as a "personnel decision for EADS."

Naming a Frenchman to head Europe's largest military contracting group would constitute a political victory for Sarkozy, but the move has the potential to create new headaches.

Analysts said naming Gallois to run EADS would almost certainly require him to give up his post at Airbus - leading to further upheaval at the plane maker, which has already seen the departure of two chief executives over the past year and is in the midst of a major restructuring.

"I would have thought they would at least make sure he would stay to see through Power 8," Doug McVitie, managing director of Arran Aerospace in Dinan, France, said, referring to the Airbus turnaround plan that foresees the elimination of 10,000 jobs across Europe over the next four years and the sale of up to six factories.

People close to Gallois said Tuesday that he would likely be reluctant to leave his job at Airbus.

"Airbus is the main reason he agreed to take the EADS job in the first place," said the person, who requested anonymity because he was not authorized to speak about the matter.