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Is Airbus The Next Enron?  
User currently offlineTangowhisky From United States of America, joined Jun 2006, 929 posts, RR: 7
Posted (7 years 11 months 2 weeks 7 hours ago) and read 5619 times:

It is only appropriate that we start debating this topic - especially after jokes about Boeing as the next Enron?

So let's see:
1. Shareholders were left in the dark until last summer on A380 delays
2. One of EADS chairman sells a large amount of his share before the word gets out
3. He tells his kids to do the same
4. French president protects his pal from insider trading
5. BAE who wanted to sell its stake in Airbus also finds out too late about the A380 problems
6. BAE alleges Airbus purposely chose its timing in order to minimize the buyout of BAE
7. Airbus loses its CEOs
8. Airbus is facing massive A380 program delay penalties and facing severance costs as part of workforce reduction
9. Another Airbus CEO resignation
10. French and German politicians get involved this week to keep things at a diplomatic tone

Enron Euro Style?


Only the paranoid survive
37 replies: All unread, showing first 25:
 
User currently offlineWatewate From Canada, joined Nov 2000, 2284 posts, RR: 1
Reply 1, posted (7 years 11 months 2 weeks 7 hours ago) and read 5615 times:

Airbus actually has healthy cash flows from selling its jets: Enron wasn't making or selling anything. I don't think it's fair to compare Airbus to Enron...

User currently offlineRobsawatsky From Canada, joined Dec 2003, 597 posts, RR: 0
Reply 2, posted (7 years 11 months 2 weeks 6 hours ago) and read 5584 times:

Enron engaged in systematic and massive fraud. Airbus's problems are mostly technical in nature with a couple of people trying to minimize the corporate and personal damage of those problems, perhaps illegaly. Anything illegal at Airbus would be a trifle and only a consequence of legitimate problems not the basis of its entire balance sheet.

User currently offlineJasond From Australia, joined Jul 2009, 23 posts, RR: 0
Reply 3, posted (7 years 11 months 2 weeks 6 hours ago) and read 5533 times:

Quoting Tangowhisky (Thread starter):
Enron Euro Style?

The two are not the same. Airbus produces something. If they go under (which they won't, I hope ) it is simply because potential costs to deliver the products outstrip revenues over a long enough period of time. Fundamental economic principle at play here.


User currently offlinePanHAM From Germany, joined May 2005, 9386 posts, RR: 29
Reply 4, posted (7 years 11 months 2 weeks 6 hours ago) and read 5480 times:

I do not see any similarity in the business models - just to explain what Enron was:

Enron Venture Capitalism You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt-equity swap with a associated general partnership so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority share-holder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more.

Whereas Airbus gets an order for a plane, builds it, delivers it to the customer who ordered that plane and receives the cash in turn., There may be some delays however.



E's passed on! That parrot is no more! He has ceased to be! E's expired and gone to meet 'is maker!
User currently offlineN328KF From United States of America, joined May 2004, 6485 posts, RR: 3
Reply 5, posted (7 years 11 months 2 weeks 6 hours ago) and read 5459 times:

Quoting PanHAM (Reply 4):
Whereas Airbus gets an order for a plane, builds it, delivers it to the customer who ordered that plane and receives the cash in turn., There may be some delays however.

Where that cow may deliver less milk than intended, and the beef will definitely not be 'lean.' And it eats 10% more grain than other cows.



When they call the roll in the Senate, the Senators do not know whether to answer 'Present' or 'Not guilty.' T.Roosevelt
User currently offlineN174UA From United States of America, joined Jun 2006, 994 posts, RR: 0
Reply 6, posted (7 years 11 months 2 weeks 4 hours ago) and read 5363 times:

Quoting PanHAM (Reply 4):
Enron Venture Capitalism You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt-equity swap with a associated general partnership so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred via an intermediary to a Cayman Island company secretly owned by the majority share-holder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more.

 rotfl 


User currently offlineSkydrol From Canada, joined Oct 2003, 972 posts, RR: 10
Reply 7, posted (7 years 11 months 2 weeks 4 hours ago) and read 5347 times:

Quoting PanHAM (Reply 4):
Whereas Airbus gets an order for a plane, builds it, delivers it to the customer who ordered that plane and receives the cash in turn., There may be some delays however.

Airbus is just waiting for the cows to come home...





LD4



∙ ---{--« ∙ ----{--« ∙ --{-« ∙ ---{--« ∙ --{--« ∙ --{-« ∙ ----{--« ∙
User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 8, posted (7 years 11 months 2 weeks 3 hours ago) and read 5274 times:

Quoting PanHAM (Reply 4):
The annual report says the company owns eight cows, with an option on one more.

Brilliant, I was wondering how to characterise the difference and you got it zackerly! As there is no attribution, I assume it was your own work, in which case, watch out for the job offers from "Son of Enron".

The only way that Airbus is like Enron, is if those folk who saw the Whale land at various airports were actually watching really, really good holograms. I am not sure what the (distant) rel of mine who thinks he recently had a flight in the A380 was actually doing - hypnotised by a German descendant of Freud I suppose.


User currently offlinePanHAM From Germany, joined May 2005, 9386 posts, RR: 29
Reply 9, posted (7 years 11 months 2 weeks 2 hours ago) and read 5191 times:

Quoting Baroque (Reply 8):

Brilliant, I was wondering how to characterise the difference and you got it zackerly! As there is no attribution, I assume it was your own work, in which case, watch out for the job offers from "Son of Enron".

no, I cannot take the credit for that. This was part of a joke circulating when Enron bit the dust and I thought it fit perfectly.

Quoting N328KF (Reply 5):
Where that cow may deliver less milk than intended, and the beef will definitely not be 'lean.' And it eats 10% more grain than other cow

....as we talk about real cows, Airbus, like Boeing and any other industry will do what farmers have done for centuries, they learn from mistakes and engineer (breed) a better product.



E's passed on! That parrot is no more! He has ceased to be! E's expired and gone to meet 'is maker!
User currently offlineTangowhisky From United States of America, joined Jun 2006, 929 posts, RR: 7
Reply 10, posted (7 years 11 months 1 week 6 days 20 hours ago) and read 4994 times:

Quoting Jasond (Reply 3):
The two are not the same. Airbus produces something. If they go under (which they won't, I hope ) it is simply because potential costs to deliver the products outstrip revenues over a long enough period of time. Fundamental economic principle at play here.

This and other reasons given have nothing to do with saying it is not like Enron. What is not the same with Enron is that no-one form Airbus stole company money like Andrew Fastow did when he was CFO at Enron. And no one cooked the books or falsified financial data.

But there are similarities between CEOs of Enron and EADS. Jeffrey Skilling was found guilty in falsifying financial statements and hiding information from shareholders. He and Ken Lay were charged for insider trading when they sold their stock before all hell broke loose. Ken Lay was also a friend of the president of the country he lived in (Ken Lay died unexpectedly this past summer waiting for sentencing).

Now here is the part that is similar with EADS. EADS co-chairman Noel Forgeard suspiciously sells hist stock and tells his kids to do the same. It is suspicious as keeping it a secret about the news of A380 delays is no small matter. Especially when it has such a strong impact on the financial health and forecast earnings of Airbus and its co-owner EADS. Both have shareholders and these shareholders have the right to know news such as these as early as possible. Noel was forced to resign not because the A380 was late (that is more of Airbus leadership mismanagement rather than EADS), but his dubious behaviour to benefit his personal finances that are linked to the A380 delays. President Chirac then gets involved (and we will never know to what extent) to save his protege Noel. Why can't the investigators do their job without the president of France getting involved? The whole thing about Noel has since gone quiet.

Hiding or massively delaying news that are considered important can be considered breach of securities laws. Any corporate communications VP will tell you that. Insider trading goes without arguments. Perhaps there were many more people who knew and benefited from these news at EADS, and it is being covered up. What brought down Enron was the collapse of its stock due to wide scale corruption. If EADS stock plunges as a result of confidenece in the equities markets due to corruption alligations , it will not be a pretty picture. Skilling and Lay purposely kept information from the scrutiny of hard questions by suspicious equities analysts. Perhaps there is more to why the German government yesterday said they would buy a large stake in the company (other than saving German Airbus jobs).



Only the paranoid survive
User currently offlineAlessandro From , joined Dec 1969, posts, RR:
Reply 11, posted (7 years 11 months 1 week 6 days 20 hours ago) and read 4947 times:

I don´t think either US nor EU would allow either B nor A to go bankrupt.

User currently offlineAirFrnt From United States of America, joined Jul 2004, 2826 posts, RR: 42
Reply 12, posted (7 years 11 months 1 week 6 days 20 hours ago) and read 4930 times:

Quoting Watewate (Reply 1):
Airbus actually has healthy cash flows from selling its jets: Enron wasn't making or selling anything. I don't think it's fair to compare Airbus to Enron...

Airbus isn't Enron. Period. But a lot of the governance problems that existed at Enron exist (in some cases much worse) at Airbus. If Fastow worked for Airbus he could do everything he did at Enron.

Quoting Robsawatsky (Reply 2):
Enron engaged in systematic and massive fraud. Airbus's problems are mostly technical in nature with a couple of people trying to minimize the corporate and personal damage of those problems, perhaps illegaly. Anything illegal at Airbus would be a trifle and only a consequence of legitimate problems not the basis of its entire balance sheet.

Part of the problem is that Airbus doesn't publish the detailed balance sheet information (EADS does for the parent company) that would be demanded in the US, to say nothing of the hugely complex SOX requirements that were a response to the Enron failure.

Airbus's books are sigificatly difficult to work out. Just look at the hard time people are having just figuring out how much the A380 is over budget by.

One of the reasons I want to see this artificial EADS structure go away, is because it might mean that we finally get good fiscal analysis and people doing their homework on EADS/Airbus and their programs.


User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 13, posted (7 years 11 months 1 week 6 days 19 hours ago) and read 4852 times:

Quoting Tangowhisky (Reply 10):
Now here is the part that is similar with EADS. EADS co-chairman Noel Forgeard suspiciously sells hist stock and tells his kids to do the same. It is suspicious as keeping it a secret about the news of A380 delays is no small matter. Especially when it has such a strong impact on the financial health and forecast earnings of Airbus and its co-owner EADS.

It does not look good and I am sure the police will tell us eventually whether it was illegal or not. Some time ago, when the Forgeard transactions were first discussed, someone wiser than I pointed out that not only were the times that Forgeard could sell strictly prescribed, but the family sales were all part of the same deal, that is it was a single sale decision, which may or may not make it all more or less suspicious. But it is different from saying he tipped off his family. One day we may find out.


User currently offlineDanny From Poland, joined Apr 2002, 3509 posts, RR: 2
Reply 14, posted (7 years 11 months 1 week 6 days 19 hours ago) and read 4838 times:

Quoting AirFrnt (Reply 12):
to say nothing of the hugely complex SOX requirements that were a response to the Enron failure.

Rest assured that concept of internal control are not unknown in Europe even if we do not have SOX. Nothing of this gets published anyway other than auditor opinion on controls.


User currently offlineN328KF From United States of America, joined May 2004, 6485 posts, RR: 3
Reply 15, posted (7 years 11 months 1 week 6 days 19 hours ago) and read 4813 times:

Quoting Baroque (Reply 13):
It does not look good and I am sure the police will tell us eventually whether it was illegal or not. Some time ago, when the Forgeard transactions were first discussed, someone wiser than I pointed out that not only were the times that Forgeard could sell strictly prescribed, but the family sales were all part of the same deal, that is it was a single sale decision, which may or may not make it all more or less suspicious. But it is different from saying he tipped off his family. One day we may find out.

Does France have a group with authority similar to that of the SEC?



When they call the roll in the Senate, the Senators do not know whether to answer 'Present' or 'Not guilty.' T.Roosevelt
User currently offlineBmacleod From Canada, joined Aug 2001, 2280 posts, RR: 0
Reply 16, posted (7 years 11 months 1 week 6 days 16 hours ago) and read 4715 times:

How did a few A380 delays turn into rumors that Airbus was a corrupt company on the verge of total collapse. They did outsell Boeing last year or the year before, right?

5 years from now when the A380 delays are ancient history and Airbus WILL STILL BE IN BUSINESS, we'll all remember late 2006 when rumors of Airbus' collapse were rampant.... tombstone 



The engine is the heart of an airplane, but the pilot is its soul.
User currently offlineThebry From United States of America, joined Jan 2006, 375 posts, RR: 0
Reply 17, posted (7 years 11 months 1 week 6 days 16 hours ago) and read 4635 times:
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Quoting Bmacleod (Reply 16):
How did a few A380 delays turn into rumors that Airbus was a corrupt company on the verge of total collapse. They did outsell Boeing last year or the year before, right?

5 years from now when the A380 delays are ancient history and Airbus WILL STILL BE IN BUSINESS, we'll all remember late 2006 when rumors of Airbus' collapse were rampant....  

I don't think anyone with two brain cells to rub together truly believes Airbus is going bust. As I've said in previous threads, the pendulum swings both ways. This year (and last year, if you take order counting practices into question) the pendulum swung toward Boeing. For all we know, it could swing back in Airbus' favor next year.

One things' for certain. For the "rumors" to stop, Airbus has got to become a more transparent company. Perhaps that'll be the outcome of all this A380 and A350 (MK I, MK II, MK III, MK IV, MK V & XWB) hoopla.


User currently offlineAirFrnt From United States of America, joined Jul 2004, 2826 posts, RR: 42
Reply 18, posted (7 years 11 months 1 week 6 days 15 hours ago) and read 4595 times:

Quoting Danny (Reply 14):

Rest assured that concept of internal control are not unknown in Europe even if we do not have SOX. Nothing of this gets published anyway other than auditor opinion on controls.

Then how do you know they are being enforced? The amount of transparency (or rather the lack) is a critical question for the long term survival of Airbus, not just during the current crisis. Lack of visibility into the accounting and orders practices leaves the door wide open for abuses.

What is wigging some people out is that a bit of the langauge (investors complaining about incomplete or incomprehensible statements, lack of break down of profit levels beyond just a "Airbus is a devision of EADS and generated 1.5 billlion, etc) all immediate recall the accounting scandals that were triggered by a market downturn.

Again, I am not saying that Airbus is enron. I am saying that no one can say with authority what Airbus's true fiscal picture is right now.


User currently offlineHalibut From , joined Dec 1969, posts, RR:
Reply 19, posted (7 years 11 months 1 week 6 days 15 hours ago) and read 4545 times:

Quoting Watewate (Reply 1):
Airbus actually has healthy cash flows from selling its jets: Enron wasn't making or selling anything.

Well ,
Airbus gets some direct help from time to time from European taxpayers via the politicians . Take that enabling away & what do you get ?


Hhmm scratchchin 

 eyebrow 

Halibut


User currently offlineTangowhisky From United States of America, joined Jun 2006, 929 posts, RR: 7
Reply 20, posted (7 years 11 months 1 week 6 days 14 hours ago) and read 4499 times:

Quoting AirFrnt (Reply 18):
The amount of transparency (or rather the lack) is a critical question for the long term survival of Airbus, not just during the current crisis. Lack of visibility into the accounting and orders practices leaves the door wide open for abuses.

EADS stock is listed in three European exchanges and perhaps the level of disclosure and transparency is adequate to meet their criteria. Does someone know if EADS reporting system would meet US type General Accounting Principles? If it does not, than perhaps that may be one reason it is not listed in NYSE. But the whole issue of transparency is even more important for the investment community. CEO's come and go as loosing faith in the management is one thing and usually less damaging than losing faith in the numbers the company says it has is another. As long as EADS is publicly traded and needs money from the capital markets, it's numbers better and should be transparent.



Only the paranoid survive
User currently offlineJcavinato From United States of America, joined Jan 2005, 520 posts, RR: 0
Reply 21, posted (7 years 11 months 1 week 6 days 14 hours ago) and read 4473 times:

I interviewed many people inside Enron in the late 1990s as part of my academic research in business, business models, and strategies. I met very sharp, bright people who took great pains to explain many of their ventures and business models. Very few of them ever made real sense to me. They were all a big house of cards. I came away from those days never wanting to own their stock, and I made sure that any mutual fund I owned has very small positions in them. In fact, in many interviews, some of the people would start the discussion with, "Now, this might require you to listen with a bit of a leap of faith...." then they would explain their gas futures modeling system, or some other creation.

Airbus is a going concern, with product lines, technologies, and a focus. Even though there are shenannagins coming out at the edges, it is a real company with a future. My visits there leave me with the fealing of being hindered with a very complex organization, processes and procedures, and more, but the people are diligent are building real things with value.


User currently offlineN328KF From United States of America, joined May 2004, 6485 posts, RR: 3
Reply 22, posted (7 years 11 months 1 week 6 days 9 hours ago) and read 4151 times:

Quoting Tangowhisky (Reply 20):
EADS stock is listed in three European exchanges and perhaps the level of disclosure and transparency is adequate to meet their criteria. Does someone know if EADS reporting system would meet US type General Accounting Principles? If it does not, than perhaps that may be one reason it is not listed in NYSE.

One exchange (Euronext), three cities. Think of it as three stores in a chain.

EADS would definitely not meet GAAP. The 2005 order stunt would have instantly failed them.



When they call the roll in the Senate, the Senators do not know whether to answer 'Present' or 'Not guilty.' T.Roosevelt
User currently offlineLaxatljfkcvg From United States of America, joined Aug 2006, 40 posts, RR: 0
Reply 23, posted (7 years 11 months 1 week 6 days 9 hours ago) and read 4036 times:

you did the same thing with boeing.


from flightaware-delta flight 644 CVG-PDX they have lost the position it was 1066ft and going about 150 anyone have anymore info.


User currently offlineLaxatljfkcvg From United States of America, joined Aug 2006, 40 posts, RR: 0
Reply 24, posted (7 years 11 months 1 week 6 days 9 hours ago) and read 4026 times:

Wait nevermind!!!!!

25 Scalebuilder : I am not by any means an expert on European financial reporting requirements, but I do believe that those in Europe are just as stringent as those in
26 N328KF : Only the U.K. The difference between U.S. and Continental European rules was one of the concerns when Euronext was negotiating to be bought by NYSE.
27 AirFrnt : To their critera is the point, and I think you awknowledge later that it is investor access, not general principle that is at stake here. (GAAP - Gen
28 Jasond : Unless I am missing something here (sorry I work in IT and consequently am not very bright) I can't see the similarity. The Enron people were governe
29 N908AW : Of course, the real reason Airbus will never go bust... ...Europe probably will never run out of money.
30 Desh : Dont think its fair to compare both - I think Airbus might be more like GM or Ford ..... than Enron. Boeing is fortunate that it has all the defence o
31 N328KF : I disagree. Forgeard was an asshole of the highest calibre. He made improper decisions, many based upon ego, and he sold out using insider informatio
32 Baron95 : Airbus and Boeing will never be like Enron. The problem with Enron is that NO ONE understood what they were about or what they were doing. All the ana
33 Scalebuilder : How would you know if EADS is SOX compliant or not? It does not have to be knowing that its shares are not traded in the US and the holding company i
34 Post contains links Baroque : Basically the answer is yes. "The French financial regulator is at the head office of Airbus in Toulouse, as trouble at its parent company EADS shows
35 AirFrnt : No, because it's not a question of scale. Because I have looked at their financial, and because of the relatively sparse Airbus documentation. SOX st
36 Scalebuilder : Please understand that "getting the clean opinion" from an audit firm, and ultimately being SOX certified, is a pretty exhaustive effort. It will inv
37 GSM763 : Airbus has had a really bad 6 months, with CEO resignations, aircraft delays etc. but I can't quite see this all as a reason to deczlare impending doo
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