OK guys.. I'm really surprised that no one has posted this yet. (Did a quick search and didn't find anything.. sorry if this is a double post.)
My father sent me this article from the Economist (UK) and it does a really good job of dissecting the current debacle at Airbus and the role meddling politicans have played in creating this fiasco. Just more proof to me that companies that follow sound capitalist business practices will ultimately triumph over those who have political and pride issues which interfere with common business sense.
Comments? (And while it's impossible to keep A vs B out of this, let's keep it within reason so this thread remains around to be debated, ok?)
(-fair use excerpt-)
The Airliner That Fell to Earth
Will politicians shoot down the world's biggest passenger jet?
The Economist (UK) 10/05/2006
Copyright (C) 2006 The Economist; Source: World Reporter (TM) - FT
PRIME MINISTERS and heads of state from France, Germany, Britain and Spain were all there to claim credit for a European triumph when the A380 passenger jet was unveiled in January 2005 in a grand ceremony in Toulouse, at the factory where the final assembly of pieces from all over Europe takes place. Barely six months later, while everyone was admiring the plane's first flight, Airbus slipped out news of a six-month delay in deliveries. Then last June it announced a further six-month delay and said it would deliver a mere nine planes in 2007, rather than 25. Heads rolled, both at Airbus and its parent company, EADS: two Frenchmen and the German boss of Airbus lost their jobs.
But new aircraft are often overdue. The first Boeing 747s were two years late in 1969. That delay nearly bankrupted Boeing, however. And this week EADS confirmed rumours that the delay to the A380 had increased to two years and spelled out the financial consequences. Only one aircraft will now be delivered next year. The delay will knock a further €4.8 billion ($6 billion) off profits and €6.3 billion off revenues at EADS between 2006 and 2010.
The bill could yet prove even higher. No one expects the big early customers such as Emirates or Singapore to cancel all their orders, but threatening noises this week from Emirates' boss Tim Clark about "considering all his options" suggest that large-scale compensation and even partial reductions in orders could be in the offing. These airlines and other early customers, such as Qantas, Lufthansa and Virgin Atlantic, have built their growth plans around having large numbers of extra seats available on an aircraft that promises cost-per-seat reductions of 15-20%. They will want Airbus to pay for the leasing of smaller Boeings or Airbuses to plug that gap. All this comes as orders for the new airliner have stuck at around 160: each delay pushes up the number needed for break-even from the original figure of 250.
The immediate cause of the disaster was a breakdown in the snap-together final assembly process in Toulouse that has served the company well for over 30 years. Rear fuselages made in Hamburg were supposed to arrive in Toulouse with all their wiring ready to plug into the forward parts coming in from factories in north and west France. But the 500km of wiring in the two halves did not match up, causing huge problems. Failure to use the latest three-dimensional modelling software meant nobody anticipated the effect of using lightweight aluminium wiring rather than copper, which is to make bends in the wiring looms bulkier. Worse, the engineers scrambling to fix the problem did so in different ways. So the early aircraft all have their own one-of-a-kind wiring systems. It will take all of next year to introduce a proper standardised process.
None of this would have mattered so much if the airliner's fuselage had all been built in France. But Germany lobbied hard to land a big chunk of the A380, to add to the final assembly of some derivatives of the A320 family. Now the greater complexity of the super-jumbo has shown up the inherent weaknesses in Airbus's production system, just as it faces a revitalised Boeing and a weaker dollar. Most of Airbus's costs are in euros, but sales are in dollars. So Airbus's new boss, Christian Streiff, must slash costs.
That does not go far enough. As Mr Streiff pointed out this week, Airbus must also catch up with Boeing in product development, cutting its lead-time for new aircraft from seven to five years. Boeing is enjoying record sales of its 787 Dreamliner, but Airbus had to go back to the drawing board to redesign its riposte, the A350. EADS has not yet said how much the delayed development of the A350 will cost, but Sash Tusa, an analyst at Goldman Sachs, an investment bank, estimates that it could be more than €2 billion.
For a real solution to its problems, Airbus must take more drastic action, such as doing away with the politically motivated division of labour between German, French, Spanish and British production sites. Mr Tusa says that Airbus, with 16 sites, has seven too many. Two factories in France, four in Germany, and one in Spain could be sold or closed down. And it would make most sense to build all of the A380 in France and all of the A320 in Germany. But both countries want to keep production of the prestigious new jet.
To further complicate matters, the German government has not denied that it has plans to buy a stake in EADS when DaimlerChrysler reduces its stake from 22.5% to 15%, as the carmaker plans to do. Rather than engaging in such power struggles, however, the German government should be helping Mr Streiff with his restructuring. French politicians, in the run-up to the presidential election next year, are unlikely to have anything useful to contribute. The fate of Airbus now depends as much on political courage as on managerial expertise.
Militant Agnostic - I don't know and you don't either.