r2rho
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Airbus And The Falling Dollar

Tue Dec 04, 2007 10:21 am

We had a (highly interesting) thread about this two weeks ago, but it was more about macroeconomics. Let's focus more on the global Airbus industrial and business strategy for this one. The falling dollar and its effects on the European aerospace industry have been in the news almost daily this past week, and even Dassault has now begun to cry out loud.

- Both Thomas Enders and Louis Gallois have sent out very frank and direct messages, to the press and towards their employees, about the damage that the low dollar is doing, and the need for bigger sacrifices than Power8 (desigend for 1.35$ per euro) demands.

- The Power8 plant sales program seems to be in a deadlock. Indeed, the possible candidates would be taking upon the entire currency risk and Airbus is not giving them any real guarantees that they will continue to buy their parts from these sites, but rather quite the opposite. Under these conditions, nobody seems to want to buy those plants. In fact, the whole plant sale scheme is rendered useless: why sell off euro-zone plants to euro-zone suppliers, ultimately keeping everything just as it is?

- EADS has hinted about the possibility of having FULL assembly of the KC-30 in Alabama, should the contract be awarded. A bluff or a real possibility?

- It has been announced that 5% of the A350 airframe will be produced in China. Russia will likely get a similar or even higher share, and will be doing part of the A320F conversions as well. This may be just the beginning?

- However, I read in Aviation Week last week that EADS is hedged at 1.15$ per euro in 2008 and 1.24$ in 2009. This contradicts the apparent sense of urgency that Enders and Gallois are showing. It would seem that EADS still has a safety cushion and can restructure progressively. Are Enders & Gallois just using this to exert pressure on unions and EU governments?

What strategy do you think Airbus should follow?
 
scouseflyer
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 10:28 am



Quoting R2rho (Thread starter):
Are Enders & Gallois just using this to exert pressure on unions and EU governments?

I think that there's some of that yes, but my take on this is that this low dollar is seen as a "trough" rather than the new norm so in 3,4,5 years time the orders that they are taking now will be paid in dollars that are worth more.

It's also worth remembering that Boeing will be suffering too as although it's sale prices are more competitive under the junk $, it's costs will be rising as the $ doesn't buy as much imported parts as before.
 
Curmudgeon
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 11:29 am

But where exactly is the upside for the dollar in either the medium or long view? Many of the more sober pundits that I am reading are suggesting a new reality for the dollar, and America in general. It may be that we will see a general move away from pricing in dollars, but it is unclear which currency will become the new standard, as the Euro may itself come under pressure in coming years.

2008 will be interesting in so many ways, not least of which will be the extent of the sub-prime problem becoming manifest, and the attendant tightening of credit and further erosion of the dollar. I can't imagine that Airbus is fully hedged in 2007 or 2008, as a year ago Streiff suggested that their positions would all expire in 2008. Don't forget that the bulk of the order book is for post 2008 delivery. Well after, in fact.

I note that the IMF said last week that the world's economies may soon be facing a "perfect storm". Exchange rates may yet prove to be only the most recent of Airbus' woes if that is true.
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art
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 12:57 pm

One possible form of mitigation: forget about hedging - contract to supply product stipulating multi-currency payment on delivery. How would that work? If a manufacturer knows its cost breakdown in terms of currency, there is nothing to stop that manufacturer making a sales contract for future payment in both dollars and euros.

To greatly oversimplify the process, imagine that the only cost in producing an aircraft is the cost of the parts. If the parts costs are $40 million and 40 million euros and the manufacturer marks up 25% on those costs, the aircraft could be sold for $50 million + 50 million euros.

In essence the manufacturer is completely covered against currency movements and the buyer is partially covered. If only 1 party has to hedge, that is an improvement over the current position where all non-US dollar customers (the majority) and non-US dollar manufacturers have to hedge.

[Edited 2007-12-04 04:58:10]
 
zvezda
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 1:03 pm

Airbus would prefer to sell aircraft for euro rather than for dollars. The reason why most of the contracts are in dollars is because the customers want to pay dollars and Boeing are happy to accept dollars. As soon as airlines are willing to buy aircraft in euro, then Airbus will sell them in euro.
 
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Stitch
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 1:14 pm



Quoting R2rho (Thread starter):
The Power8 plant sales program seems to be in a deadlock...In fact, the whole plant sale scheme is rendered useless: why sell off euro-zone plants to euro-zone suppliers, ultimately keeping everything just as it is?

Airbus might be trying to shift the risk to their suppliers as Boeing has done with the 787. Of course, Boeing has seen some risks from doing that.  Wink

Quoting R2rho (Thread starter):
EADS has hinted about the possibility of having FULL assembly of the KC-30 in Alabama, should the contract be awarded. A bluff or a real possibility?



Quoting R2rho (Thread starter):
It has been announced that 5% of the A350 airframe will be produced in China. Russia will likely get a similar or even higher share, and will be doing part of the A320F conversions as well. This may be just the beginning?

A recent article hypothesized that the real reason Boeing is fighting the KC-30 so hard is to not protect the 767, but the 737. Northrup-Grumman could become the second US commercial airline manufacturer, building the A320RS for Airbus at Mobile.

Quoting R2rho (Thread starter):
However, I read in Aviation Week last week that EADS is hedged at 1.15$ per euro in 2008 and 1.24$ in 2009. This contradicts the apparent sense of urgency that Enders and Gallois are showing. It would seem that EADS still has a safety cushion and can restructure progressively. Are Enders & Gallois just using this to exert pressure on unions and EU governments?

Those hedges certainly help, but EADS has a good deal of expenses coming up that might exceed the value of those hedges and would be billed at the "current market rate".

Also, those 1500+ orders booked this year won't be built until 2010 or later, when the hedge will be even less effective should the dollar remain in the $1.50 realm.
 
gsosbee
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 2:01 pm



Quoting Curmudgeon (Reply 2):
Many of the more sober pundits that I am reading are suggesting a new reality for the dollar, and America in general.

Remember exchange rates are all about interest rates and speculation. The dollar is low v. the pound and Euro because interest rates in the US are lower than in Europe. People tend to move their investment funds to areas with the higher interest rates. This drives down the "price" of the dollar.

Don't believe everything you read about the American economy. It is still the strongest and most productive. As long as the basic economic fundamentals are in balance with full employment, the American economic machine will keep churning.
 
flysherwood
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 5:08 pm



Quoting Scouseflyer (Reply 1):
It's also worth remembering that Boeing will be suffering too as although it's sale prices are more competitive under the junk $, it's costs will be rising as the $ doesn't buy as much imported parts as before.

The imported parts are purchased in dollars as well. These parts are on long term contracts, so it actually helps Boeing if the dollar keeps dropping.
 
flysherwood
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 5:13 pm



Quoting Art (Reply 3):
To greatly oversimplify the process, imagine that the only cost in producing an aircraft is the cost of the parts. If the parts costs are $40 million and 40 million euros and the manufacturer marks up 25% on those costs, the aircraft could be sold for $50 million + 50 million euros.

I don't know that you could find an airline willing to pay in Euros right now.
 
atmx2000
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 5:48 pm



Quoting Scouseflyer (Reply 1):
It's also worth remembering that Boeing will be suffering too as although it's sale prices are more competitive under the junk $, it's costs will be rising as the $ doesn't buy as much imported parts as before.

I would say the concern is more for raw materials. Parts that were outsourced may have been in response to the strong dollar.

Quoting Art (Reply 3):
One possible form of mitigation: forget about hedging - contract to supply product stipulating multi-currency payment on delivery. How would that work? If a manufacturer knows its cost breakdown in terms of currency, there is nothing to stop that manufacturer making a sales contract for future payment in both dollars and euros.

Would the customer like that level of complexity? It will make them jump through added hoops to make comparisons between competing offers.

Quoting Stitch (Reply 5):
Airbus might be trying to shift the risk to their suppliers as Boeing has done with the 787. Of course, Boeing has seen some risks from doing that.

True, but Boeing was trying to shift development risk more than currency risk. It remains to be seen whether Airbus will transfer critical tasks out of the company.
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iahflyer
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 5:51 pm



Quoting R2rho (Thread starter):
EADS has hinted about the possibility of having FULL assembly of the KC-30 in Alabama, should the contract be awarded. A bluff or a real possibility?

Does anyone have an idea about when this contract is to be awarded?
Little airports with the big jets are the best!! Floyd
 
r2rho
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RE: Airbus And The Falling Dollar

Tue Dec 04, 2007 7:02 pm

A relatively "easy" solution (because it's half done) would be to expand the A320 FAL currently under construction in China. I think it will make 6 A320s per month. You could have China take a bigger share than that and reduce the output of the TLS FAL.

As for fully assembling the KC-30 in Mobile, I see a problem with Airbus logistics. The Beluga can't ferry all those fuselage sections across the Atlantic. Even with intermediate technical stops, it would stretch the Beluga fleet beyond its capacity. I doubt shipping would be fast enough, and I don't see Airbus buying a B-747LCF  Wink Would creating new manufacturing plants for A330 fuselage sections in the US make sense economically for an aircraft that would just be produced as tankers and possibly also freighters? I don't think so given the potential numbers involved. Would winning their first major US Defense contract be worth some sacrifices? Definitely yes.

But in any case... the FAL is but a fraction of the total cost of the aircraft. If you want to cut costs, it is better to offshore other things like structural components etc. I see a real possibility in outsourcing to Russia. They have very good technical know-how, low labor costs, and geographical proximity. But if US Defense contracts are their real target, they could follow the BAE path and offshore to the US.

Quoting IAHFLYER (Reply 10):

Does anyone have an idea about when this contract is to be awarded?

It's been pushed back so many times that I don't believe any date they give anymore. Last thing I heard, I think, was jan or feb 2008.
 
NAV20
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RE: Airbus And The Falling Dollar

Wed Dec 05, 2007 1:27 pm

Quoting R2rho (Thread starter):
What strategy do you think Airbus should follow?

I don't think that there IS a strategy that Airbus can follow - or, rather, that they will be ALLOWED by the two governments that are in virtual control of them to follow - that will do anything constructive about the problems they face.

First of all, the problem is not so much a falling dollar as it is a rising Euro. The Euro has appreciated roughly twice as fast against the $US as any other major currency. This is no accident, it is fundamental EU strategy. A high Euro means lower import costs, and therefore lower inflation within the EU, which in turn means political popularity in the short term. Unfortunately it ALSO means uncompetitive export industries in the medium term. But how much that worries Europoliticians - particularly French ones - is amply shown by these classic quotes from a Eurocrat (who also happens to be the current head of the World Trade Organisation):-

"PARIS, Dec 5 (Reuters) - Firms such as Airbus-maker EADS should look beyond the short term when taking decisions about whether to move production abroad to cope with the strength of the euro, WTO chief Pascal Lamy said on Wednesday.

"The head of the World Trade Organisation told France's i-Tele television that competitiveness was the key to job creation in the globalised economy and noted that German firms had managed to adapt to the euro, which recently hit record highs of about $1.4965.

"His comments come two days after EADS boss Louis Gallois said the firm would have to move production outside the euro zone if it were to survive the dollar's weakness.

"Gallois is not only one to issue such warnings. Dassault Aviation's chief said in a weekend interview that his company could move some production abroad to shield the French jet maker from the dollar's sharp fall against the euro.

"I don't think that these are things that one can decide on in the short-term," Lamy, a Frenchman, told iTele. "Today, compared to five years ago, the euro is a lot stronger and the dollar a lot weaker, but it will come back."

"The euro hit record lows of $0.8225 in 2000.

"If I take the case of EADS and Dassault (Aviation) ... my feeling is that they also have a lot of costs in dollars. So I don't think these are issues that can be looked at in the short term," Lamy said."


http://www.guardian.co.uk/feedarticle?id=7128052

Furthermore, not content with telling Airbus that they must somehow magically find a way of becoming competitive regardless of the Euro's uncontrolled appreciation, the two governments that effectively run EADs (French and German) continue to prevent the company from doing anything constructive. The original strategy, first put forward by Streiff (at the cost of his job) and further promoted by Enders and Gallois, was to reduce the workforce by at least 10,000 and sell off a number of plants to raise cash. So far EADS employment figures have gone UP, not down - and it is becoming perfectly clear that government-supported guarantees to the unions have meant that EADS can only sell factories to people who will undertake to maintain the full existing labour force after purchase.

Not surprisingly, this means that there are very few takers for the offered plants; and those that there are are not offering much money for them. For this reason EADS is STILL not sure if any sell-off deals will actually be finalised: and there remain doubts as to whether some of the plants earmarked for sale will ever actually be sold off:-

"PARIS, Dec. 5, 2007 (Thomson Financial delivered by Newstex) -- EADS is rethinking its plans to sell subsidiary Airbus's plant in Augsburg, Financial Times Deutschland reported, citing industry sources.

"Although the plant is still officially up for sale, EADS now prefers to keep the site while selling the Varel and Nordenham plants to US investor Spirit Aerosystems Holdings Inc (NYSE:SPR) , the paper added.

"A separate tender process is running for the site in Laupheim.

'There are no new developments,' a company spokesman told Thomson Financial News. 'We are currently in talks with all bidders and we intend to reach a solution until the end of the year.'


http://money.cnn.com/news/newsfeeds/...cles/newstex/AFX-0013-21438037.htm

I would submit that the (only) solutions to EADS/Airbus' developing longterm problems are (as they have always been):-

1. The EU should 'manage' the value of the Euro in the same way that all other nations do - seeking a balance between short-term internal prosperity and long-term external competitiveness.

2. The company should be freed from day-to-day political influence, and allowed to concentrate on doing whatever it takes to produce competitive products and return to profitability.

3. The best managers should be appointed to run the whole show - regardless of nationality or political 'acceptability.'

[Edited 2007-12-05 05:33:58]
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
r2rho
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RE: Airbus And The Falling Dollar

Wed Dec 05, 2007 8:58 pm

The losses suffered from the A380 delay and the failure of the first A350 are purely due to internal problems and wrong decisions, not to currency rates. And a portion of Airbus suppliers are already payed in dollars (I'd like to find a reliable source with the exact percentage, but can't). The impact of the dollar on Airbus's revenue can't be that direct. Changing a company's global strategy based on today's currency rate (that is unpredictable in either direction for the future) does not seem a good long-term strategy, although it may bring some short-term gains.

I'm currently very skeptical of Airbus management. I think there's something else behind this, and they are only using the currency rate as a perfect excuse. Something fishy is going on.

Quoting NAV20 (Reply 12):

1. The EU should 'manage' the value of the Euro in the same way that all other nations do - seeking a balance between short-term internal prosperity and long-term external competitiveness.

Well, the ECB was trying to make the newborn Euro a strong currency that would establish a firm position in the world economy. It is apparently succeeding in it, but could not predict that the US would let the dollar go into free-fall.

Quoting NAV20 (Reply 12):
2. The company should be freed from day-to-day political influence, and allowed to concentrate on doing whatever it takes to produce competitive products and return to profitability.

3. The best managers should be appointed to run the whole show - regardless of nationality or political 'acceptability.'

 checkmark  I must agree to that. The day a portuguese becomes CEO of EADS, all its problems will be solved.
 
Lumberton
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RE: Airbus And The Falling Dollar

Wed Dec 05, 2007 11:06 pm



Quoting R2rho (Reply 13):
I think there's something else behind this, and they are only using the currency rate as a perfect excuse. Something fishy is going on.

 checkmark I believe the expression goes like this: "strike while the iron is hot". EADS' management may not get another opportunity like this for a long time. Of course, they may have to open up there books to convince the unions that they are not making enough to keep everyone employed. And that could mean having to address the unions' concerns that they are not pricing their aircraft sufficiently. And that could mean disclosing the real selling prices. And those prices could leak to the press. And management could have to defend themselves from the press, politicos, and labor, that they pursuing a "market share" strategy and that the fact that EADS is not making enought money is their fault! Just a scenario, but I can't see even the relatively docile unions at EADS rolling over and accepting these cuts without a fight.
"When all is said and done, more will be said than done".
 
NAV20
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RE: Airbus And The Falling Dollar

Wed Dec 05, 2007 11:38 pm



Quoting Lumberton (Reply 14):
EADS' management may not get another opportunity like this for a long time.

Looks like the EU government 'cavalry' is already charging to the rescue - of the Indians!

"PARIS (Thomson Financial) - France's finance minister Christine Lagarde is due to meet EADS chief executive Louis Gallois this afternoon to ask for more details of his plans to shift some Airbus production to the dollar zone.

'I am meeting Mr Gallois at 1730 to ask him exactly how his Power8 plan will be organised in the context of the rising euro,' Lagarde told the French national assembly."


http://www.forbes.com/markets/feeds/afx/2007/12/05/afx4407283.html

"PARIS (Thomson Financial) - Spanish Economy Minister Pedro Solbes warned aerospace giant EADS against making major cuts at its Spanish plants after the company reiterated plans to move some of its Airbus production to dollar-zone countries, the daily Le Parisien said."

http://www.forbes.com/markets/feeds/afx/2007/12/05/afx4405836.html

And we already knew that someone (presumably the German government) is casting doubt on whether the Augsburg plant should be sold.

Given that the politicians seem to be determined not to allow management to fire anyone, OR sell anything off on sensible terms, OR shift any production overseas, the company is virtually certain to go on making a loss. Which means that the only remaining option would appear to be big injections of government cash to keep the wheels turning. Which will presumably take the form of the 'A350 launch aid' recently suggested by some EADS 'company spokesmen.'

The difference this time, however, is that launch aid is currently the subject of an ongoing dispute at the WTO. So any EADS/Airbus rescue will depend on a deal being struck between the EU and the US government. Prospects for pulling off such a deal do not look good.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
Lumberton
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RE: Airbus And The Falling Dollar

Thu Dec 06, 2007 12:12 am



Quoting NAV20 (Reply 15):
...the only remaining option would appear to be big injections of government cash to keep the wheels turning. Which will presumably take the form of the 'A350 launch aid' recently suggested by some EADS 'company spokesmen.'

Perhaps that's been the agenda all along?  duck 

This thread had promise, but died a sudden death after a few posts. Another alternative to coping with the rising dollar. Story: "Airbus May Move Production To US..." (by WestWing Dec 3 2007 in Civil Aviation)
"When all is said and done, more will be said than done".
 
osiris30
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RE: Airbus And The Falling Dollar

Thu Dec 06, 2007 12:59 am

Well some of us said way back when Power8 came out that the Airbus positioning of the Euro exchange rate was likely 'questionable' at best. Some of the same people stated that things like factory sales and layoffs, while 'easy' to talk about would be difficult to enact in reality.

Airbus's problem is not the Euro, it's not the goverments of Europe, it's not the unions, the politicians, their choice of products to bring to market, the 380 delays or any ONE of those issues. It's all of those combined with the real curse, politcally appointment management who lack any real power to do anything.

The unfortunate truth of the matter is that, while Airbus is a first-rate aircraft builder, and has engineers of unquestionable talent, the entire premise upon which the company was built is doomed to mediocraty. It would be important to note that it was rumoured that Airbus was originally created as a way for Europe to capture x% of the civ-av marketplace. As such Airbus has been a stunning success.

We (the A.net community) are trying to measure the company against a goal they never had as a core objective, and that is profitability. The governments of Europe who back EADS have more than enough money to keep Airbus afloat indefinitely and the people of Europe seem to be more than happy to have tax dollars spent in this fashion. We can all sit here and debate whether or not profitability should be the core goal of a company created in this cauldron, but the reality is, at least from my prespective, being profitable was always an after thought for Airbus when compared to market share.

Will Airbus go broke? Not a chance. The various governments won't allow their egos to be dismantled by a true free-market. Will Airbus ever lay-off a significant portion of their current employees, also very unlikely IMHO. Just look at some of the quotes in this thread alone. Will anything ever truly change at Airbus, probably not.

The only real risk to Airbus as a manufacturing entity is that they become irrelevant by losing more and more of their grasp on reality and what their customers' want. We saw some of that with the 380, and it was further demonstrated and infinitely more obvious when we look at the development history of the 350 and all its variants.

On the flip side to that risk is the basic fundamental principals of the aviation business today:
1) Airbus is part of (for all intents and purposes) a duopoly. This leaves virtually no where for customers to turn if they are unhappy with an Airbus offering (Boeing can and will only build so many aircraft a year.. they learned that lesson the hard way).
2) Even if you completely miss what your customers want, aircraft are so 'cookie' cutter, and most enhancements are pretty much no-brainers, that even if you are just faking it, it's pretty hard to miss the mark by enough to TRULY drive away all your customer base.

Ofcourse these same 'silver' linings apply to Boeing as well, and helped keep Boeing around through some of their dark days, so I'm not saying they are the ONLY reason Airbus is still around, but trying to point out that, while we may go on and on here about manufacturer A vs. manufacturer B, at the end of the day it's pointless. Airbus isn't going anywhere anytime soon unless there is a drastic change in the way the European governments view the organization and I don't see that happening until things in Europe get *much* worse than they are today.
I don't care what you think of my opinion. It's my opinion, so have a nice day :)
 
r2rho
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RE: Airbus And The Falling Dollar

Thu Dec 06, 2007 9:39 pm



Quoting Lumberton (Reply 14):
And that could mean having to address the unions' concerns that they are not pricing their aircraft sufficiently. And that could mean disclosing the real selling prices.

Which raises an interesting issue: should Airbus raise its list prices? (or reduce its refunds, which is equivalent)

I think they could. Not for the aircraft already firmed, of course, but for future orders. Sure, they'd lose some orders, but they have a huge backlog anyway, and a slight rise in prices wouldn't imply a dramatic decrease in sold aircraft. They could sell aircraft a bit more expensive when airlines make follow-up orders, but keep the refunds for any new customers to a type.

Quoting NAV20 (Reply 18):
The plot thickens - looks as if the proposed plant sales are off.

Well as I said, selling off euro-zone plants only to keep them as the same euro-zone plants but under different ownership defeats the whole purpose. And with EADS playing with the idea of offshoring production, who would want to invest their money in a plant with an uncertain future?
 
osiris30
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RE: Airbus And The Falling Dollar

Thu Dec 06, 2007 11:06 pm

Perhaps more interestingly in that article is this:

"Chief Executive Officer Louis Gallois told reporters yesterday that a decision on the sale of the plants would be made ''as soon as possible'' to enable the selection of partners to build the Airbus division's new A350 airliner. "

What impact does this have on the 350, the partner selection, the timelines and cost of that program? If they aren't selling those plants, are they now going to outsource less of the production and eat the increased costs? Seems to be a likely course of action and not unexpected given the conditions set out in my post above.
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NAV20
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RE: Airbus And The Falling Dollar

Thu Dec 06, 2007 11:42 pm



Quoting Stitch (Reply 19):
It may not be Airbus driving it, but the proposed buyers. I can only assume that Airbus would have a fixed price with those facilities for their product.

The buyers always drive the prices, Stitch.  Smile

I suspect that, way back, EADS management made a simple mistake. Since it was my business, long ago, to advise and negotiate on things like factory sales, that wouldn’t surprise me in the least; I’ve seen other businessmen make the same mistake (at first).

Owner-occupied factories tend to be valued for balance sheet purposes at ‘cost less depreciation’ – so Gallois and Co. would have seen values of some billions in the books against the plants they wanted to sell. It must have looked like a simple matter to sell them off and realise those billions.

But such ‘book’ figures do not usually reflect achievable market value. Aircraft factories tend to be huge specialist buildings miles from anywhere. As such they cost a lot to build and maintain but tend to have very low open market values – effectively, they’re not much use to anyone except ANOTHER aircraft manufacturer. So on a straight ‘vacant possession’ basis, they are highly unlikely to be worth anything like the sort of money they cost to build.

The way round this is usually ‘sale and leaseback’ – EADS COULD have offered the plants for sale to investors with the benefit of 40-year leases at indexed rents. They might well have realised something like the book values then.

Instead, as far as one can judge from the leaked information, they appear to have required any interested parties to agree to:-

- Pay top dollar for the buildings, and absorb all the risks of ownership thereafter.
- Agree to build components for Airbus at low or fixed prices (in Euros).
- Agree to keep the existing workforce on on their existing terms and conditions.

If that’s the situation it wouldn’t be surprising if any offers are extremely low – not the sort of billions that EADS would have been hoping for when they first looked at the balance sheet figures. The main reason for that outcome would NOT be the Euro appreciating - it would be the original over-optimistic view of the likely market.

Had someone like me been asked for advice, I'd have recommended the 'sale and leaseback' route from the outset; and they'd have had the money 'in hand' years ago. Wouldn't work now, though - any prospective landlord is going to take one look at EADS' 2006/7 results and 'forward outlook' and decide that they're not a good risk.

Quoting Osiris30 (Reply 21):
If they aren't selling those plants, are they now going to outsource less of the production and eat the increased costs?

That would appear to be the only alternative, Osiris30. Except that they currently don't have any profits coming in with which to pay the increased costs, so they'd need government cash to follow that course.

Idea, M. Gallois! Offer the plants for sale with the benefit of 40-year leases from EADS at indexed rents, which are GUARANTEED by the governments concerned. The WTO might not like the guarantee idea, but at least you'd get your A350 development cash then. No charge for the advice, I'm retired now.......
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
Ruscoe
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RE: Airbus And The Falling Dollar

Fri Dec 07, 2007 12:49 am

What I would like to know is how is Airbus achieving record sales at a time of record Euro values??

Ruscoe
 
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Stitch
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RE: Airbus And The Falling Dollar

Fri Dec 07, 2007 3:08 am



Quoting R2rho (Reply 20):
Which raises an interesting issue: should Airbus raise its list prices?

I think they could. Not for the aircraft already firmed, of course, but for future orders. Sure, they'd lose some orders, but they have a huge backlog anyway, and a slight rise in prices wouldn't imply a dramatic decrease in sold aircraft. They could sell aircraft a bit more expensive when airlines make follow-up orders, but keep the refunds for any new customers to a type.

I believe Boeing and Airbus last raised their list prices around 2006, so it might be a bit early to boost them again.

However, Airbus is doing a good job of stuffing their backlog, which does help Boeing raise their prices due to superior delivery positions. Airbus could "auction" some of their slots for follow-on orders by offering earlier deliveries for higher prices (using some of the money to compensate the original customer for accepting the delay).

Quoting Ruscoe (Reply 23):
What I would like to know is how is Airbus achieving record sales at a time of record Euro values?

Lower prices, superior delivery positions, superior product (A330 vs. 767 and A380 vs. 747), embedded market (many customers are significantly or totally Airbus operators), etc.
 
osiris30
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RE: Airbus And The Falling Dollar

Fri Dec 07, 2007 3:13 am



Quoting Ruscoe (Reply 23):
What I would like to know is how is Airbus achieving record sales at a time of record Euro values??

They sell in dollars and haven't upped their pricing with the rise of the Euro.. hence they are bleeding money right now (although it's more complicated than that given hedges, and delivery timeframes, but the basic idea is there)
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r2rho
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RE: Airbus And The Falling Dollar

Sat Dec 08, 2007 9:29 pm



Quoting Stitch (Reply 24):
I believe Boeing and Airbus last raised their list prices around 2006, so it might be a bit early to boost them again.

Airbus unions were handing out leaflets this week accusing management to sell planes with too high discounts "just to beat Boeing" and achieve record orders this year. Don't know how much truth is in that, but it's worth considering.

It is rumored in French press that Gallois is pushing to decide the plant sales before the end of the year, while Enders is trying to delay the final decision. It is also rumored that Enders would be leaning more towards Spirit acquiring the sites, while the French Government is "urging" EADS to pick Latecoere. On the German side, it's no secret that the goverment is pushing for a "German solution", which is one of the things that is delaying the sale of the German plants.
 
NAV20
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RE: Airbus And The Falling Dollar

Sat Dec 08, 2007 11:27 pm



Quoting R2rho (Reply 26):
Airbus unions were handing out leaflets this week accusing management to sell planes with too high discounts "just to beat Boeing" and achieve record orders this year. Don't know how much truth is in that

Thanks for the new information, R2rho. That sounds like exactly what the unions WOULD be saying - "Sell the aeroplanes for more money or don't sell them at all." That confirms, to my mind, that they simply do not understand that they are involved in a duopoly situation - two firms only, selling virtually-equal products into the same limited market. Charging higher prices than Boeing for comparable products would therefore be likely to result not in FEWER sales but in NO sales.

I wonder if, like that Eurocrat I quoted earlier, the unions (and the goverrnments) think that there is some sort of 'Mercedes/BMW solution' out there somewhere. For many years Germany has succeeded world-wide in selling cars which cost a lot more to build and to buy than cars that offer broadly-similar performance. But cars are a much bigger and more varied market and things like personal preferences and prestige count for a lot; those factors don't apply to airlines.

The rumours of disagreements as to who buys which plant (including which nationality the buyers enjoy) come as no surprise. Odd, really - the EU was originally expected to break down nationalistic barriers, but it seems still to have a long way to go.  Smile
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
Ruscoe
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RE: Airbus And The Falling Dollar

Sun Dec 09, 2007 12:56 am



Quoting NAV20 (Reply 27):
that they are involved in a duopoly situation - two firms only, selling virtually-equal products into the same limited market. Charging higher prices than Boeing for comparable products would therefore be likely to result not in FEWER sales but in NO sales.

I don't think it would necessarily have that effect.

Supermarkets I know, and if two Supermarkets are operating in the same market, without significant outside competition, an interesting process occurrs. Firstly they each discount milk until no one is making much money, Then one cracks and raises the price of their milk. Do they go out of business?. No, because the other supermarket raises their prices also, and thus without any kind of price fixinjg or collusion whatever, the margins return to normal levels.

So how does this relate to the present situation with Airbus/Boeing. Well we are still in the discounting to nothing phase.

For once I agree with the Unions and believe Airbus should try and get more margin, (they need the money). Boeing won't be able to resist and will raise their margins also. Boeing won't try the "put them out of business", because the Airbus successor may be a much harder nut to crack.

Airbus may pay a price in market share, but I believe they will better placed for the future.

Ruscoe









Ruscoe
 
NAV20
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RE: Airbus And The Falling Dollar

Sun Dec 09, 2007 1:20 am



Quoting Ruscoe (Reply 28):
I don't think it would necessarily have that effect.

Of course you could be right, Ruscoe - so far 'duopoly' is an economic theory, it has never been fully played out in practice, to the 'end-game.'

But I would suggest that your supermarket analogy doesn't really fit the aircraft industry because supermarkets sell a very wide range of products and can therefore afford to play on the swings AND the roundabouts.  Smile Boeing and Airbus are effectively ONLY 'selling milk.'

The other question that arises is how on earth any normal airline would explain to its shareholders why it was voluntarily paying higher prices for comparable products - like, in particular, paying over the odds for say A320s instead of 737s?

As I see it, Airbus' only options are either to go on as they're going (effectively storing up future trading losses) and somehow secure government financial support to keep going; or to drop out of the market until such time as they have their costs under control, and the EU has taken action to lower the value of the Euro.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
osiris30
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RE: Airbus And The Falling Dollar

Sun Dec 09, 2007 3:44 am



Quoting NAV20 (Reply 27):
Thanks for the new information, R2rho. That sounds like exactly what the unions WOULD be saying - "Sell the aeroplanes for more money or don't sell them at all." That confirms, to my mind, that they simply do not understand that they are involved in a duopoly situation - two firms only, selling virtually-equal products into the same limited market. Charging higher prices than Boeing for comparable products would therefore be likely to result not in FEWER sales but in NO sales.

Some industry 'experts' have suggested that Airbus is pricing so aggresively that Boeing has chosen to not even bid against the Airbus proposals. To me that indicates more than a reasonable discount and that is likely the union beef. Now I personally despise unions, but they may have a sliver of truth upon which they are pinning their arguement this time around.

Quoting NAV20 (Reply 29):
The other question that arises is how on earth any normal airline would explain to its shareholders why it was voluntarily paying higher prices for comparable products - like, in particular, paying over the odds for say A320s instead of 737s?

See above  Smile It's been suggested that some offers from Airbus haven't even been close to reasonable in terms of market value. I'm sure all those 320s that are going to be made partially in China have almost no margin on them, to the point where Airbus may be better off without those deals entirely. I mean think about it, Airbus is filling the production lines (all the way down the production chain) with large volumes of low margin business, while Boeing is cherry picking those customers that don't mind paying a little more and getting a more timely delivery.

Apparently these customers exist as Boeing is selling aircraft. The difference is, Boeing is turning a profit on theirs, and Airbus a rather whopping loss.
I don't care what you think of my opinion. It's my opinion, so have a nice day :)
 
r2rho
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RE: Airbus And The Falling Dollar

Sun Dec 09, 2007 8:00 pm



Quoting NAV20 (Reply 27):
Charging higher prices than Boeing for comparable products would therefore be likely to result not in FEWER sales but in NO sales.

That's what I think too. Airbus could very well give up a few percentage points of market share, but at least be selling profitably. This year, Airbus will likely beat Boeing in number and value of orders... but in profit???

Quoting Osiris30 (Reply 30):
Now I personally despise unions, but they may have a sliver of truth upon which they are pinning their arguement this time around.

Yup. I'm no fan of Airbus unions, but I'm no fan of the EADS/Airbus management either, specially considering their recent history. So I wouldn't give either side full credibility. But the unions may have a point on this one. It may probably be the most intelligent thing they've said since the whole crisis started.
 
jacobin777
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RE: Airbus And The Falling Dollar

Sun Dec 09, 2007 8:05 pm



Quoting R2rho (Reply 26):
It is rumored in French press that Gallois is pushing to decide the plant sales before the end of the year, while Enders is trying to delay the final decision. It is also rumored that Enders would be leaning more towards Spirit acquiring the sites, while the French Government is "urging" EADS to pick Latecoere. On the German side, it's no secret that the goverment is pushing for a "German solution", which is one of the things that is delaying the sale of the German plants.

...according to this Bloomberg article:

"EADS to Freeze Sales of Airbus Plants in Europe, Le Figaro Says

By Simon Kennedy

Dec. 6 (Bloomberg) -- European Aeronautic, Defence & Space Co. is freezing the sale of six Airbus SAS factories in Europe, Le Figaro reported, citing a person familiar with the plan.

The decline in the dollar against the euro is a key reason for the decision, the newspaper said. "

http://www.bloomberg.com/apps/news?p...=conews&tkr=BA:US&sid=awReSbcDdtSM
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Lumberton
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RE: Airbus And The Falling Dollar

Sun Dec 09, 2007 10:24 pm

While I personally feel the union's complaint WRT profitability may have some validity, we will most likely never know. The only way this would ever become know for sure if EADS were somehow forced to disclose to the union the actual selling prices. Short of a long strike, I simply can't see EADS going down this road.
Just saw this Reuters report that Lagardere is supporting outsourcing jobs outside the eurozone. How will this play with the French politicos and the unions? Note that Lagardere denies that Airbus cut prices to win the China order.
Lagardere leans on France over Airbus jobs plan

Quote:
PARIS (Reuters) - The senior French industrial shareholder in Airbus parent EADS (EAD.PA: Quote, Profile, Research) said on Sunday it was preparing to push ahead with plans to shift jobs outside the euro zone and doubted the government would intervene.
Arnaud Lagardere, whose family conglomerate owns 7.5 percent of Europe's largest aerospace group, reiterated dire warnings by EADS management over the impact of a weak dollar, calling the currency's slide a "malaise that can be fatal."
. . .
He also denied Airbus had been forced to slash prices to win a 160-plane, $17 billion order from China in order to prevent embarrassment during last month's order-laden state visit to China by French president Nicolas Sarkozy.
"If Airbus sold the planes, then it was at a good price," Lagardere said. He said no political pressure had been applied.

"When all is said and done, more will be said than done".
 
osiris30
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 12:46 am



Quoting Lumberton (Reply 33):
Note that Lagardere denies that Airbus cut prices to win the China order.
Lagardere leans on France over Airbus jobs plan

Wow just the fact he went out of his way to mention it sure makes it sound like a pile of BS to me.. I hadn't even thought there would be politcal pressure on Airbus to sell during that visit... really makes you wonder.. kinda like when the cops tell you that there is 'nothing to see here'.... (while surrounding the dead alien and his downed flying saucer)
I don't care what you think of my opinion. It's my opinion, so have a nice day :)
 
baroque
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 12:59 am



Quoting Osiris30 (Reply 34):
. kinda like when the cops tell you that there is 'nothing to see here'.... (while surrounding the dead alien and his downed flying saucer)

Sorry to hear that has happened to you.  Big grin
 
NAV20
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 2:07 am

From experience of negotiating with the Chinese, my advice to anyone trying it is start at double what it's going to cost you, and you may succeed in getting oral agreement to a breakeven deal. Until a week or two later, when a new fellow gets off the plane and says that he's senior to the guy you were talking to earlier - and has some questions........

I don't know that the price of the actual aeroplanes is particularly relevant in this case - the real 'price' of the China deal is the multi-billions of costs faced by Airbus in setting up a whole new assembly plant and training up the workforce.

This quote in the press story interests me:-

Quoting Lumberton,reply=33 quoting Lagardere:
"If Airbus sold the planes, then it was at a good price," Lagardere said.

Whaddyamean 'IF,' M. Lagardere? You're a senior director of EADS. Surely you know damn well what price was negotiated? Or if you don't, you haven't been doing your job?
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
jacobin777
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 2:26 am

"Airbus is expected to post another loss during 2007, and the company is only likely to achieve profit margins around 5% by 2010, Mr. Gallois reiterated. Part of this is also due to pricing pressure within the industry, with Airbus recently selling airplanes at substantial discounts to its list prices."*

*-online.wsj.com June 2007...
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NAV20
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 2:51 am



Quoting Jacobin777,reply=37 quoting Gallois:
"Airbus is expected to post another loss during 2007, and the company is only likely to achieve profit margins around 5% by 2010, Mr. Gallois reiterated.

Dead right, IMO, Jacobin777.

But Airbus is no longer the whole picture. For a long time the military side of EADS was making a loss and Airbus profits were subsidising it. After the A380 fiasco that switched round - Airbus was making the loss and the rest of EADS was making up the difference. This year, the military side has its own problems - the A400M delay and now the loss of the Indian helicopter order:-

"NEW DELHI (Reuters) - India has cancelled a $600-million deal to buy 197 military helicopters from EADS and may offer the contract to other bidders, the defence ministry said on Friday.

"Besides being a setback for EADS, the European maker of the Airbus family of commercial jets, the deal's collapse on Thursday will also further delay India's plans to replace its ageing helicopter fleet by at least two years, newspapers said.

"We will issue a fresh request for proposals in the next two or three months," said Sitanshu Kar, a defence ministry spokesman.

"The deal collapsed amid newspaper reports of irregularities in the bidding process and the illegal use of middle men."


http://in.reuters.com/article/businessNews/idINIndia-30870420071207

It therefore looks as if, as already predicted by the company itself, the whole EADS/Airbus shooting match will do well to break even in 2007, and may end up posting an actual loss.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
jacobin777
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 3:28 am



Quoting NAV20 (Reply 38):
This year, the military side has its own problems - the A400M delay and now the loss of the Indian helicopter order:-

You are correct NAV20..unfortunately its been hurting them quite a bit......

It's going to be interesting to see how Airbus reacts to this current ever-falling $US dollar....while I do believe there will be a "rebound rally" in the $US dollar (due to too many "short interest, profit taking, etc), I don't see the $US dollar recovering anytime soon, especially as long as the Federal Reserve keep on lowering interest rates and printing "fiat currency" (as well as the debt staying highly inflated)..there are others who disagree with me, which is fine... Smile
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Lumberton
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 10:37 am

EADS may have convinced Lagardere that they need to offshore jobs, but from the sound of this Reuters report, they have some work to do to convince the French government. I found the "applying more political pressure" particularly interesting.
French PM doesn't want Airbus jobs going overseas

Quote:
"The government is very aware of the problems the euro's level poses for the aeronautical industry. The president (Nicolas Sarkozy) has not stopped sounding the alarm to our partners and the monetary authorities," Fillon said.
"All the same, Airbus will not overcome this difficulty by delocalising. You don't respond to a purely cyclical problem by strategic decisions which commit you in the long term."
Arnaud Lagardere, whose family conglomerate owns 7.5 percent of Europe's largest aerospace group, said on Sunday the plan to move jobs out of the euro zone would not go against EADS' interests and that the French state would not do anything that harms the interests of EADS.
Fillon chose to put a different emphasis: "France and Germany invested heavily in Airbus. It wasn't to see it leave in pieces towards the dollar zone."
Asked how the government would go about trying to dissuade the firm from moving jobs abroad, he said more efforts would be made to boost productivity, by helping subcontractors and applying more political pressure.

Apparently the French PM feels that the exchange rate difficulties are "cyclical".

[Edited 2007-12-10 02:46:46]
"When all is said and done, more will be said than done".
 
Joni
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 12:07 pm



Quoting R2rho (Thread starter):
- However, I read in Aviation Week last week that EADS is hedged at 1.15$ per euro in 2008 and 1.24$ in 2009

Adapting to a different exchange rate requires structural changes and implementing them on the scale of something like EADS takes years - so it's prudent to start now.

Quoting Scouseflyer (Reply 1):

I think that there's some of that yes, but my take on this is that this low dollar is seen as a "trough" rather than the new norm so in 3,4,5 years time the orders that they are taking now will be paid in dollars that are worth more.

There are also contrary views, namely that the dollar is now about where it should be according to macroeconomic analysis. Some feel the dollar still has some way to decline further, and that the dollar may never (knock wood) recover to the heights of 2002 or so, because it's position as the reserve currency of the world and currency of almost all international trade has now been irrecoverably lost.
 
baroque
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 12:27 pm



Quoting Jacobin777 (Reply 39):
It's going to be interesting to see how Airbus reacts to this current ever-falling $US dollar....while I do believe there will be a "rebound rally" in the $US dollar (due to too many "short interest, profit taking, etc), I don't see the $US dollar recovering anytime soon,



Quoting Joni (Reply 41):
There are also contrary views, namely that the dollar is now about where it should be according to macroeconomic analysis.

If the macroecon anal is correct, then undoubtedly the US $ will rise or fall further, as the one place it does not seem to "like" is about the appropriate value.  Wow!

There has been some mention of the complicating factors but as the USD has declined relative to the Euro:
1. The Eurozone has imported some deflation to offset higher commodity prices, most noticeable in relation to oil, but for Airbus, most important in relation to metals such as copper, aluminium (they are still using a heck of a lot) and nickel (on those pesky wires as well as a hundred other places).
2. The US is importing inflation courtesy of the same commodity prices.
3. Airbus still imports a chunk by value of its planes from the US and these should be cheaper in Euros, assuming they priced them in USD.
4. Boeing is still importing quite a bit from Europe and will have instant pain, as I am sure will its suppliers as Boeing seeks lower prices in USD.

The soaring Euro might not be a perfectly balanced two edged sword but it will be cutting both ways.

Other things being equal, the sub-prime crisis would be expected to have a greater effect on the cost of capital for Boeing than for Airbus
 
NAV20
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 1:10 pm



Quoting Baroque (Reply 42):
If the macroecon anal is correct, then undoubtedly the US $ will rise or fall further, as the one place it does not seem to "like" is about the appropriate value.

Good fun to watch, though, Baroque.

When I studied economics Keynes still reigned supreme. Governments should 'intervene' to run their economies. But then came Milton Friedman - all that you needed to do to 'control' a given economy was raise or lower interest rates. Roughly the equivalent, IMO, of driving a car by using only the accelerator.

Later still, politicians realised that they didn't have to take responsibility for running their respective economies at all - they could hand the responsibility over to their central banks. Never mind that, in the experience of most of us, most bankers put in charge of a corner shop would immediately piss off most of the customers with their lack of people skills whilst bankrupting the place by drawing their self-awarded salary and incentives...........

So we're in a situation where the USA, Australia, and Europe all have economic problems. The reaction of the US central bankers was to lower interest rates. The reaction of the Australian ones was to raise them. The reaction of the European ones was to leave rates as they are........

Whatever happens from here, it's really our own fault. Through having allowed our respective governments to put the financial lunatics in charge of the asylum........
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
baroque
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 1:35 pm



Quoting NAV20 (Reply 43):
Good fun to watch, though, Baroque.

When I studied economics Keynes still reigned supreme.



Quoting NAV20 (Reply 43):
Whatever happens from here, it's really our own fault. Through having allowed our respective governments to put the financial lunatics in charge of the asylum........

True and true Nav20. Do I sense the ghost of JMK poised for a comeback? It appears that the Ruddsters are not going to sit by and watch the Reserve Bank but may well start to pull a few of the levers they still have left. Perhaps it is time for Petty to start drawing the economy again. That would at least be fun.

I always think that lowering inflation by raising interest rates is probably slightly more difficult in the short run than lifting yourself into the air by pulling on your bootlaces. Wayne Swann's two problems might be that Wayne is close to Whine and Swanning is what Costello was doing.

Costello (for non Aus posters, our recently "retired" treasurer) may go down as the last of his kind, and in honour of this, be given a posthumous inactivity award.

But you are right, not all that different situations, and one up, one down and one wobbling.

I wonder if there is any treatment we can get for having suffered the four Aus banks over the past 15 years! Maybe, just maybe, 23 Nov 2007 (latest Aus election) could go down as the start of a seachange. At least Swann starts off with what was supposed to be a surplus, although how it was faring by the time the auction had finished in anyone's guess! I wonder if that means if you are running a surplus, you can raise interest rates, whereas if you are up to your ears in debt, you need to lower them

Interesting times.
 
NAV20
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 2:04 pm



Quoting Baroque (Reply 44):
I always think that lowering inflation by raising interest rates is probably slightly more difficult in the short run than lifting yourself into the air by pulling on your bootlaces.

Exactly so, Baroque - if prices are rising the obvious remedy is to raise prices.......  Smile

Being 'serious' for a moment, I have honestly NEVER been able to understand Friedmanism. Maybe I should have worked harder and got myself a scholarship to the Harvard Business School instead of just scraping through in London.......
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
jacobin777
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 2:47 pm



Quoting Lumberton (Reply 40):
Asked how the government would go about trying to dissuade the firm from moving jobs abroad, he said more efforts would be made to boost productivity, by helping subcontractors and applying more political pressure.

..thanks for the link Lumberton.. thumbsup ....quite interesting regarding "political pressure"....isnt' this what EADS/Airbus was trying to move away from...?  scratchchin 

Ostensibly, it seems the more things change, the more they stay the same...

Quoting Joni (Reply 41):
There are also contrary views, namely that the dollar is now about where it should be according to macroeconomic analysis. Some feel the dollar still has some way to decline further, and that the dollar may never (knock wood) recover to the heights of 2002 or so, because it's position as the reserve currency of the world and currency of almost all international trade has now been irrecoverably lost.

 checkmark ...I believe this is just one of many reasons as to why the $US dollar will not gain in the long-term

Quoting Baroque (Reply 42):
If the macroecon anal is correct, then undoubtedly the US $ will rise or fall further, as the one place it does not seem to "like" is about the appropriate value.  Wow!

What's interesting is given how much the Dow Jones Industrials has rallied the past week, I wonder if the Federal Reserve will be cutting the expected 50 basis points......that being said, in the end, the Federal Reserve can't do to stem the tide of inflation/deflation/stagflation..

Quoting Baroque (Reply 42):
1. The Eurozone has imported some deflation to offset higher commodity prices, most noticeable in relation to oil, but for Airbus, most important in relation to metals such as copper, aluminium (they are still using a heck of a lot) and nickel (on those pesky wires as well as a hundred other places).

 checkmark ...it works both ways...

Quoting Baroque (Reply 42):

The soaring Euro might not be a perfectly balanced two edged sword but it will be cutting both ways.

 checkmark ...so far, it seems to be effecting Airbus more than Boeing, but I'm curious as to how much it really is effecting Airbus.

Quoting NAV20 (Reply 43):
Whatever happens from here, it's really our own fault. Through having allowed our respective governments to put the financial lunatics in charge of the asylum........

..NAV20, here in the United States, it's rather difficult to blame the "common man" for electing the Chair of the Federal Reserve...for example, Sir Alan Greenspan spanned (pun intended) numerous govts...both Democratic and Republican.

Personally I think he was pathetic....IMHO  twocents 
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yowza
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 3:05 pm

At the recent GCC summit, one of the items on the agenda was removing the dollar peg that most GCC nations (Kuwait excepted) have in place between their own currencies and the US$. If this materializes then some of the pressure on Airbus could be lifted although I am pretty confident this would apply mainly to deals going forward and that re-evaluating the ticket prices on already-ordered items is out of the question.

YOWza
 
baroque
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 3:41 pm



Quoting Jacobin777 (Reply 46):
so far, it seems to be effecting Airbus more than Boeing, but I'm curious as to how much it really is effecting Airbus.

This is likely the case, but it may also be the case that Airbus has more to gain by making a fuss about it. We shall see, as they say!
 
r2rho
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RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 8:09 pm



Quoting Osiris30 (Reply 34):
Wow just the fact he went out of his way to mention it sure makes it sound like a pile of BS to me.. I hadn't even thought there would be politcal pressure on Airbus to sell during that visit...

Well, Sarkozy absolutely had to sell more airplanes during his China visit than Chirac did (he sold 150 during his 2006 visit, Sarkozy sold 160 this year). The fact that Lagardere has to come out to deny it, IMO proves that there was political pressure, or at least "encouragement", to sell a lot of planes. Neither Gallois nor Enders have happily boasted about the order much... maybe because Airbus won't be making much (any?) profit out of it. It was all staged as a "victory" of Sarkozy, not Airbus.

Quoting Lumberton (Reply 40):
Apparently the French PM feels that the exchange rate difficulties are "cyclical".

Well if you look back to the 80's and the years of Aerospatiale, the French Franc was very high versus the dollar. Then the rate leveled again. And you can't really predict today whether the dollar will recover or not.

Quoting NAV20 (Reply 27):
The rumours of disagreements as to who buys which plant (including which nationality the buyers enjoy) come as no surprise. Odd, really - the EU was originally expected to break down nationalistic barriers, but it seems still to have a long way to go.

With the current generation of short-sighted political leaders in Europe, I'm afraid so...  Sad We could really use some visionary leaders like the ones we've had in the past (Adenauer, De Gaulle, Kohl, Mitterrand, heck... even Thatcher). Our current leaders are uncapable of seeing (or planning) anything beyond their respective re-election dates.

Trying to sell the German plants to a German company, the French to a French one, and leaving everything exactly as it is (just paint over the Airbus logo on the signs)... no wonder nobody wants to buy 'em! If you really want a European solution, you could consolidate the plants (close some, expand others, redistribute the workshare) under one or two European companies (or consortiums) that would buy them. Selling them country by country won't help.
 
flysherwood
Posts: 881
Joined: Thu Jul 20, 2006 2:58 am

RE: Airbus And The Falling Dollar

Mon Dec 10, 2007 8:29 pm



Quoting Lumberton (Reply 40):
EADS may have convinced Lagardere that they need to offshore jobs, but from the sound of this Reuters report, they have some work to do to convince the French government. I found the "applying more political pressure" particularly interesting.

Well, when President Sarkozy was told that the Billions upon Billions of Euros of taxpayer funds that has been invested in that "Jobs Program" named Airbus and EADS is going to create jobs overseas while cutting work in France, he would be right to be upset and fight it.
 
NAV20
Posts: 8453
Joined: Thu Nov 27, 2003 3:25 pm

RE: Airbus And The Falling Dollar

Tue Dec 11, 2007 1:06 am

Quite incredible lack of communication at the top, by all accounts:-

"TOULOUSE (Thomson Financial) - Thomas Enders, chief executive of EADS unit Airbus has said there will be no announcement on the buyers chosen for production sites it is selling before Christmas, a union source said, citing Enders.

"Louis Gallois, CEO of parent company EADS told Les Echos earlier that talks over the plant disposal programme have been complicated by the dollar's weakness, which has made potential buyers more cautious.

"But he said the negotiations were not running late, because EADS had never set a deadline."


http://www.forbes.com/markets/feeds/afx/2007/12/10/afx4421479.html

It's getting to the stage where EADS only needs one standard press release for all occasions - "No decision has been taken."

I for one can't see any sign of an 'end-game' emerging. The objectives of Power8 were to reduce labour costs and raise cash from which loss-making A380 production (and, presumably, A350 design development) could be funded. None of that is happening.

Quoting R2rho (Reply 49):
Trying to sell the German plants to a German company, the French to a French one, and leaving everything exactly as it is (just paint over the Airbus logo on the signs)... no wonder nobody wants to buy 'em! If you really want a European solution, you could consolidate the plants (close some, expand others, redistribute the workshare) under one or two European companies (or consortiums) that would buy them. Selling them country by country won't help.

Couldn't agree more. But it looks as if nothing will actually happen - all that seems to be going on is that the firm and the various governments appear to be talking about different SORTS of nothing.  Smile

Does seem to boil down, though, to a situation where the only available option to keep the company running - the only one that all the European parties are likely to be able to agree on - is an injection of government cash. I wouldn't be at all surprised if that was already being planned - and presumably being negotiated with the US government and the WTO.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci