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Is The Structure Of Eads Legal?  
User currently offlineRuscoe From Australia, joined Aug 1999, 1607 posts, RR: 2
Posted (7 years 10 months 2 weeks 1 day 23 hours ago) and read 2631 times:

An article on Bloomberg got me thinking about this.

The EU are saying that the German Veto on a non German majority ownership of VW is illegal under EU law.

Would the same law make the current "balanced" structure of EADS illegal?

Another question which comes to mind is this: Is the timing of this announcement about VW in any way related to the upcoming battle between France and Germany over EADS? It certainly would be a strong bargaining tool for France to use against Germany!

Ruscoe

24 replies: All unread, jump to last
 
User currently offlinePelican From Germany, joined Apr 2004, 2531 posts, RR: 8
Reply 1, posted (7 years 10 months 2 weeks 1 day 23 hours ago) and read 2613 times:

Quoting Ruscoe (Thread starter):

Would the same law make the current "balanced" structure of EADS illegal?

Nope - because the VW law is something completly different. The EU commission argues that the VW law hinder free capital movement within the EU. How does the EADS structure hinder free capital movement?

Quoting Ruscoe (Thread starter):
It certainly would be a strong bargaining tool for France to use against Germany!

Why so? What has France to do with this lawsuit?

pelican


User currently offlineStitch From United States of America, joined Jul 2005, 31431 posts, RR: 85
Reply 2, posted (7 years 10 months 2 weeks 1 day 23 hours ago) and read 2613 times:
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EADS is chartered in Belgium, I believe, so they would fall under Belgian corporate law, not German or French, I imagine.

And if Belgian corporate law is more...relaxed...then German or French or British or Spanish law, that might be why they chose that country instead of one of the four original partner's...


User currently offlinePelican From Germany, joined Apr 2004, 2531 posts, RR: 8
Reply 3, posted (7 years 10 months 2 weeks 1 day 23 hours ago) and read 2596 times:

Quoting Stitch (Reply 2):
EADS is chartered in Belgium, I believe, so they would fall under Belgian corporate law, not German or French, I imagine.

Slight correction Airbus is chartered in the Netherlands. EU laws apply for the Netherlands as well as for France and Germany.
The VW lawsuit is about a German law which is probably in conflict with EU laws.

pelican


User currently offlineRuscoe From Australia, joined Aug 1999, 1607 posts, RR: 2
Reply 4, posted (7 years 10 months 2 weeks 1 day 22 hours ago) and read 2557 times:

Quoting Pelican (Reply 3):
The VW lawsuit is about a German law which is probably in conflict with EU laws.

I do see some similarities between the situation at VW and EADS.

Certainly it involves more than one European State but the the ownership structure would appear to me to limit the flow of Capital within the EU as much as the VW situation.

Quoting Pelican (Reply 1):
Why so? What has France to do with this lawsuit?

I don't know , but both situations seem to be about EU Govt involvement in Industry. (Not singling out the EU here' just look at the Australian situation with Qantas), and would lend itself to not pushing in one direction,in return for relief in another.
Ruscoe


User currently offlineStitch From United States of America, joined Jul 2005, 31431 posts, RR: 85
Reply 5, posted (7 years 10 months 2 weeks 1 day 22 hours ago) and read 2552 times:
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Quoting Pelican (Reply 3):
Slight correction Airbus is chartered in the Netherlands.

Thank you.


User currently offlineHaggis79 From Germany, joined Jun 2006, 1096 posts, RR: 1
Reply 6, posted (7 years 10 months 2 weeks 1 day 21 hours ago) and read 2493 times:

Quoting Ruscoe (Reply 4):
Certainly it involves more than one European State but the the ownership structure would appear to me to limit the flow of Capital within the EU as much as the VW situation.

I don't see that... to me the situation is quite different... in the VW case it is an actual LAW of a country who fixes the ownership structure in a certain way.... in the EADS case it's just the status quo... there's no german law saying France can't aquire more shares if they wanted.... the problem would more likely be in the field of finding someone selling them shares....



300 310 319/20/21 332/3 343 AT4/7 143 B19 732/3/4/5/G/8/9 742/4 752/3 763/4 77E/W CR2/7/9 D95 E45/70 F50 F70 100 M11 M90
User currently offlineLeskova From Germany, joined Oct 2003, 6075 posts, RR: 70
Reply 7, posted (7 years 10 months 2 weeks 1 day 16 hours ago) and read 2434 times:

As others have already pointed out, the two situations are quite different.

One is based on a law that, quite likely, conflicts with EU principles. The same, by the way, applies to some extent to airlines, as airlines must still be at least 50.1% domestically owned - but that's another situation because of the current system of bilaterals.

The EADS structure, however, is simply based on who chose to invest what. As we could see with DaimlerChrystler selling 7.5% of their shares, there was no law whatsoever hindering them from selling to whomever they wanted - what happened was that there was the (call it political if you want to, some call it economic patriotism, others call it an investment into jobs in Germany, others...) will to keep those shares in German hands. Had no-one in Germany decided to buy those shares, and if then the state had also said "not interested", those shares could have gone to anyone.

VW = Law. EADS = No law.

Different situations alltogether - VW being, most likely (or most probably), illegal, EADS not being illegal.



Smile - it confuses people!
User currently offlineRuscoe From Australia, joined Aug 1999, 1607 posts, RR: 2
Reply 8, posted (7 years 10 months 2 weeks 1 day 15 hours ago) and read 2418 times:

Thankyou for all that.

Is the "balanced" arrangement of EADS just a gentlemans agreement or is the " structure of EADS established by their own "Articles of Association" or other legal documentation, in a country (Netherlands) subject to EU Law.

If it is in their "Articles" or other legal documentation and the Netherlands is covered by EU Law then, it seems to follow logically to me that the "balanced" structure prevents a free flow of capital between European Nations, because the free flow is effectively limited to certain amounts, and to from specific countries.

Ruscoe


User currently offlinePanHAM From Germany, joined May 2005, 9750 posts, RR: 31
Reply 9, posted (7 years 10 months 2 weeks 1 day 15 hours ago) and read 2406 times:

Airbus Industry was a corporation that existed somehow "between the laws" of the various countries it existed in. AB was one of the main reasons why a European Corporate Law was chartered.

EADS and the Airbus companies are incorporated under European law as a "Socdiete Europeene". The shares are free flow which does not prevent local Governments from politely asking Banks to buy the shares other shareholders (DaimlerChrysler) intend to sell. DC could have sold these shares to anybody, however. Even to Boeing if they were interested.

The VW case is pending for a long time, much longer than the current EADS/Airbus hysteria. The VW law simply said that no shareholder had more than 20% of the voting rights, even if his actual holding exceeded that percentage. Plus, the State of Nerther saxony had the golden share. That will end and the irony is that the Porsche/Piech Family will benefit from this and they will practically gain control over VW.



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently offlineXT6Wagon From United States of America, joined Feb 2007, 3432 posts, RR: 4
Reply 10, posted (7 years 10 months 2 weeks 1 day 15 hours ago) and read 2393 times:

I think the question comes in as to if its legal or not... not based on the shares, but on the structure of the board of directors that is set not by the shareholders but designated parties.

I would not doubt that in some shape or form that is illegal in one or more member states of the EU...

That said, Airbus would have to burn one of the nations they do buisness with really badly to get any complaints legal or otherwise about this. So far its not in anyones best intrest to get in a "street fight" as it were with EDAS. Well that and most of the people who want a balance of power and might not have it would only lose if they brought it up based on shares since France is more or less currently king of the hill as far as ammount of shares held.


User currently offlineLeskova From Germany, joined Oct 2003, 6075 posts, RR: 70
Reply 11, posted (7 years 10 months 2 weeks 1 day 15 hours ago) and read 2393 times:

Quoting Ruscoe (Reply 8):
If it is in their "Articles" or other legal documentation and the Netherlands is covered by EU Law then, it seems to follow logically to me that the "balanced" structure prevents a free flow of capital between European Nations, because the free flow is effectively limited to certain amounts, and to from specific countries.

If it were, it would - but since it isn't, it doesn't...  Wink



Smile - it confuses people!
User currently offlinePanHAM From Germany, joined May 2005, 9750 posts, RR: 31
Reply 12, posted (7 years 10 months 2 weeks 1 day 14 hours ago) and read 2374 times:

Quoting XT6Wagon (Reply 10):
think the question comes in as to if its legal or not... not based on the shares, but on the structure of the board of directors that is set not by the shareholders but designated parties.

I would not doubt that in some shape or form that is illegal in one or more member states of the EU..

EU law overrules local law. What is legal in the EU is legal in any of the member states as well. Local law has to be adapted accordingly.

EADS/Airbus is incorporated under EU law as a SOCIETE EUROPÉENE. The board is voted in and whoever owns the shares has a voting right. The German problem is that they are in bed with the French and France always has been and likely always will be an Old Boys System because they all have attended the same Ecole Nationale, regardless if they are in politics or business.

That is why the state influence is higher than in most similar nations and if Germany does not want to go under in this important company, they have to make sure that the influence remains balamced. That is why the State of Hamburg bought some shares indirectly and that is why DC sold their shares not on the open market but to a Banking Consortium.

The same game is played in the US, you have the same state governent intervention in the states of Wasjhington or Kansas or Illinois and deals are sweetemned with local tax exemptions and whatever else. It's all about jobs and the taxes the local states get from the payrolls and the spending power of those employed with large corporations,



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently offlineGbfra From Germany, joined Sep 2006, 448 posts, RR: 0
Reply 13, posted (7 years 10 months 2 weeks 1 day 10 hours ago) and read 2294 times:

Quoting Ruscoe (Thread starter):
The EU are saying that the German Veto on a non German majority ownership of VW is illegal under EU law.

First of all, the European court has not decided yet.

And it's not about a German veto on an non German majority.

It is all about the principle "one share" one vote" the EU has been defending now for years.

The law on VW stemming from 1960 doesn't allow voting rights of more than 20 %. Even if you own 28% (like Porsche does at the moment) of the capital you only dispose of 20% of the voting rights. This was to the benefit of the Land of Niedersachsen which owns about 20%.

Quoting Ruscoe (Reply 8):
Is the "balanced" arrangement of EADS just a gentlemans agreement or is the " structure of EADS established by their own "Articles of Association" or other legal documentation, in a country (Netherlands) subject to EU Law.

If it is in their "Articles" or other legal documentation and the Netherlands is covered by EU Law then, it seems to follow logically to me that the "balanced" structure prevents a free flow of capital between European Nations, because the free flow is effectively limited to certain amounts, and to from specific countries.

The "balanced" arrangement is part of pact among certain shareholders. It is not fundamental to EADS. If the current shareholders called it a day EADS would not cease to exist.

Shareholders are of course allowed to form coalitions of interest if they think it suits their interest. You can find that in other European companies too. It does not prevent a free flow of capital. It just means you can't buy everey single share. (The Quandt family owns about 50% of BMW. Does the fact that you can't take-over BMW mean a free low of capital is impossible?)

Quoting PanHAM (Reply 9):
Airbus Industry was a corporation that existed somehow "between the laws" of the various countries it existed in. AB was one of the main reasons why a European Corporate Law was chartered.

The old Airbus Industry was organised as a French "Groupement d'interêt économique" (GIE), which was some sort of cooperation of independent partners. It was originally created for wine-growers to cooperate. A GIE did not have to publish figures nor was it obliged to pay taxes. It was a strange type of organisation, but definitely a legal one under French legislation.

Quoting PanHAM (Reply 12):
EADS/Airbus is incorporated under EU law as a SOCIETE EUROPÉENE

I don't think so. When EADS was created the "Société Européenne" (SE) did not exist yet. SE are possible since the end of 2004.

EADS is a Dutch company, its subsidiary Airbus is a French company.



The fundamental things apply as time goes by
User currently offlinePanHAM From Germany, joined May 2005, 9750 posts, RR: 31
Reply 14, posted (7 years 10 months 2 weeks 1 day 9 hours ago) and read 2261 times:

I knew about the GIE thing and I thought that after the SE became available they switched at least Airbus to this corporate structure.

EADS is indeed a "Naamlose Venootschap" , in France an "S.A.S." and in Germany a GmbH and the Spanish company does not show how it is trading. It is also not exactly clear how the various Airbus c0ompanies are trading. They reveal very little under investors relations.

The initial question however, if EADS is legal, yes, they are of course. The VW case ha snothing to do with EADS.



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently offlineGbfra From Germany, joined Sep 2006, 448 posts, RR: 0
Reply 15, posted (7 years 10 months 2 weeks 1 day 9 hours ago) and read 2238 times:

Quoting PanHAM (Reply 14):
The initial question however, if EADS is legal, yes, they are of course. The VW case ha snothing to do with EADS.

I agree.



The fundamental things apply as time goes by
User currently offlineScouseflyer From United Kingdom, joined Apr 2006, 3403 posts, RR: 9
Reply 16, posted (7 years 10 months 2 weeks 1 day 9 hours ago) and read 2238 times:

Quoting PanHAM (Reply 9):
That will end and the irony is that the Porsche/Piech Family will benefit from this and they will practically gain control over VW

Which will complete a sensational comeback by Porsche. In 15 years they've gone from basically bankcrupt and selling a car (the 924) which was someone else's cast-off design and was powered by the engine from a VW mini-bus to taking over the 6th (?) largest car manufacturer in the world.

It's the equivalent of Pan-Am if they'd avoided bankcrupcy, rising up and buying out AA or Apple buying out Microsoft......

Anyway back to planes - the EADS structure appears to be totally differant to the VW one which appears to of been an attempt by the state government in Germany to have their cake and eat it - they own less than 50% of the shares but they changed the law to prevent the company falling into foreign hands......


User currently offlinePanHAM From Germany, joined May 2005, 9750 posts, RR: 31
Reply 17, posted (7 years 10 months 2 weeks 1 day 9 hours ago) and read 2208 times:

Quoting Scouseflyer (Reply 16):
Anyway back to planes - the EADS structure appears to be totally differant to the VW one which appears to of been an attempt by the state government in Germany to have their cake and eat it - they own less than 50% of the shares but they changed the law to prevent the company falling into foreign hands....

over protection which BTW lead to the fact that VW does not make money on the cars they build in Germany, workers are paid too much and the union bosses areon the payroll and fringe benefits that includes Brasilian who... pardon, let's get back to airlines.

Where, BTW a similar system exists., prohibiting foreign ownership by law. One of the reasons why the US carriers are in bad shape and new jobs are not created at start ups like Virgin America.


 Big grin show me another subject where you can come from who... to virgins



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently offlineStitch From United States of America, joined Jul 2005, 31431 posts, RR: 85
Reply 18, posted (7 years 10 months 2 weeks 1 day 9 hours ago) and read 2204 times:
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Quoting PanHAM (Reply 17):
Where, BTW a similar system exists., prohibiting foreign ownership by law. One of the reasons why the US carriers are in bad shape and new jobs are not created at start ups like Virgin America.

I'm not sure LH owning UA would automatically make things better for UA. Or BA owning AA would suddenly make AA a world power in air service.

The US domestic market has it's parallels to the EU domestic market, to be sure, but as EU carriers predominately started as international carriers (before the EU erased internal borders amongst it's member states), their operations have a different historical background.


User currently offlinePanHAM From Germany, joined May 2005, 9750 posts, RR: 31
Reply 19, posted (7 years 10 months 2 weeks 1 day 8 hours ago) and read 2181 times:

Quoting Stitch (Reply 18):

I'm not sure LH owning UA would automatically make things better for UA. Or BA owning AA would suddenly make AA a world power in air service.

I did not say that. Again, Automotive ius a good example where Daimler Benz just tries to get rid of that bottomless well called Chysler. An LH - US merger would likely have been the same desaster. But it prevents start ups as with the Virgin example and it prevents the purchase of small and well managed companies.

Airlines have found a much better way of cooperation anyhow - but alliances work in the service industry and not in manufacturing.



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently offlinePelican From Germany, joined Apr 2004, 2531 posts, RR: 8
Reply 20, posted (7 years 10 months 2 weeks 1 day 8 hours ago) and read 2150 times:

Quoting PanHAM (Reply 19):

Airlines have found a much better way of cooperation anyhow - but alliances work in the service industry and not in manufacturing.

Of course alliances work in manufacturing, too. Just an example - to stay in the aviation world - the 787 seems to work.

pelican


User currently offlinePanHAM From Germany, joined May 2005, 9750 posts, RR: 31
Reply 21, posted (7 years 10 months 2 weeks 1 day 7 hours ago) and read 2125 times:

Quoting Pelican (Reply 20):
Of course alliances work in manufacturing, too. Just an example - to stay in the aviation world - the 787 seems to work.

don't confuse sub-contractors and alliances



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently offlineStitch From United States of America, joined Jul 2005, 31431 posts, RR: 85
Reply 22, posted (7 years 10 months 2 weeks 1 day 6 hours ago) and read 2086 times:
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Quoting PanHAM (Reply 21):
don't confuse sub-contractors and alliances

In the case of the 787, Pelican probably isn't. The major 787 sub-contractors are also risk-sharing partners - and profit-sharing, for that matter.

That may not make it a true "alliance" (though IP issues may indeed make it so in some cases), but it is much more then it was in the 707 through 747 days where Boeing just picked suppliers to provide parts to a certain specification and Boeing could freely shop around to find the best supplier who could meet that specification.


User currently offlinePanHAM From Germany, joined May 2005, 9750 posts, RR: 31
Reply 23, posted (7 years 10 months 2 weeks 1 day 5 hours ago) and read 2041 times:

Quoting Stitch (Reply 22):

In the case of the 787, Pelican probably isn't. The major 787 sub-contractors are also risk-sharing partners - and profit-sharing, for that matter.

I know the set-up and I expected that reply. Still, they are (risk sharing) sub-contractors, that becomes normal in today'smanufacturing and again we are looking at the Automotive Industry who started that..

Whatever you will call that kind of partnership, the plane will be a Boeing 787 and not a Boeing-Mitsubishi-Alenia 787 and Boeing will have the overall responsibility on engineering. .

The alliances in a service business are different, as we know. I guess I don't have to explain that oin detail.

.



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently offlinePelican From Germany, joined Apr 2004, 2531 posts, RR: 8
Reply 24, posted (7 years 10 months 2 weeks 1 day 2 hours ago) and read 1995 times:

Quoting PanHAM (Reply 21):

don't confuse sub-contractors and alliances



Quoting PanHAM (Reply 23):

Whatever you will call that kind of partnership, the plane will be a Boeing 787 and not a Boeing-Mitsubishi-Alenia 787 and Boeing will have the overall responsibility on engineering. .

But in the end it doesn't matter how you call it. Risk sharing and profit sharing a core elements which can define an alliance. Sure it differs from the strategic alliances we see in the airline business, nonetheless it's a kind of alliance.
A joint venture is another form of alliance typical for the manufacturing sector. The most famous in Germany is probably BSH (Bosch und Siemens Hausgeraete GmbH). How about Engine Alliance or International Aero Engines? Hence your statement that alliances don't work in manufacturing is incorrect.

pelican

[Edited 2007-02-14 21:26:32]

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