France Offers to Boost Stake in Airbus

Associated Press

By ANGELA DOLAND 03.05.07, 1:41 PM ETFrance's outgoing prime minister and leading presidential candidates offered to come to Airbus' aid on Monday, highlighting the high political stakes in the struggle to rescue the European planemaker.

Prime Minister Dominique de Villepin and conservative candidate Nicolas Sarkozy said the government would be ready to boost its stake in the company through a capital increase.

Airbus announced a restructuring plan including massive job cuts and factory selloffs last week, but has said it will seek to avoid layoffs by using voluntary plans such as early retirement.

Villepin met Monday with lawmakers dealing with the situation, and said the state is "ready to participate" along with other Airbus shareholders "in any capital increase judged necessary by the company," Villepin said after the meeting.

"In the face of this crisis, the state will play its full role," Villepin said.

Sarkozy said that he, too, would support the idea, but added that a capital increase, "of which the state could participate, should be part of a project to bring new partners and new jobs" to Airbus. He spoke after a meeting with union leaders at the headquarters of the European planemaker in Toulouse.

"The only thing to do is profit from this crisis to renegotiate all of the balances within EADS," Sarkozy said.

The French state holds 15 percent in EADS, the joint French-German parent company of Airbus. Core German shareholder DaimlerChrysler AG has a 22.5 percent share, and Paris-based Lagardere SCA has 7.5 percent. The German government has no stake.

European Aeronautic Defence & Space Co. and Airbus Chief Executive Louis Gallois said in an interview published Saturday in the Financial Times that the EADS board agreed to consider any solution to increase the group's capital resources, including issuing new shares. However, he said that neither DaimlerChrysler nor Lagardere was interested in taking part in an equity issue.

Airbus has said it plans to shed 4,300 jobs in France, 3,700 in Germany, 1,600 in Britain and 400 in Spain over four years - with roughly half the cuts coming from the 57,000-strong Airbus work force and the rest from subcontractors, who currently employ a further 30,000 staff.

Villepin said Gallois pledged at a meeting Monday that a restructuring plan wouldn't involve forced layoffs or site closures in France.

However, he added, "As a shareholder the government thinks that EADS shouldn't pay a dividend this year in order to strengthen its investment capacity."

Villepin also said that EADS' corporate governance should be simplified to enable it to "take on the future industrial challenges faced by the company."

Troubled Airbus has become an issue in the French presidential campaign, with a string of candidates suggesting the state step in.

Airbus has announced a restructuring plan to shed 10,000 staff and sell, close or spin off six plants as it struggles to survive the fallout from a two-year delay to its A380 superjumbo and the weaker U.S. dollar.

Strikes are planned Tuesday at several Airbus plants around France, along with protest demonstrations.

Employee representatives at three German plants facing an uncertain future said Monday work had resumed after walkouts last week.

With the French presidential race between conservative Interior Minister Sarkozy and Socialist Segolene Royal neck-and-neck, Sarkozy has lately toned down his free-market ideas to appeal to the center.

As finance minister in 2004, Sarkozy engineered a rescue plan for engineering giant Alstom that included a euro2.5 billion (US$3.25 billion at exchange rates then) state-orchestrated bailout to steer the train and power plant builder away from the brink of bankruptcy. The bailout brought complaints from EU trade officials.

"Airbus is a European success, it's a very technologically advanced company and we can't let it down," Sarkozy said.

Royal also was expected to discuss the issue with German Chancellor Angela Merkel on Tuesday in Berlin.

She has said she would suspend the restructuring plan if elected and increase government investment in Airbus. She also said the state should reform its laws so that regional governments can take stakes in Airbus.

"The state must emerge from its lethargy and inertia and stop thinking that the market can solve everything," Royal said.

Any rescue plan for Airbus would come under scrutiny from EU officials and could further inflame trade relations with the United States, which is already pressing complaints at the World Trade Organization over state aid to Airbus.