Controversy compounds Airbus woes

EADS, the European aerospace group, is grappling with a controversy at its aircraft unit Airbus that has highlighted communications lapses and threatens to revive Franco-German friction.

    Delivery of Airbus's superjumbo airliner will be delayed

    Noel Forgeard, co-chief executive at the European Aeronautic Defence and Space company, has been in the hot seat since Tuesday when Airbus announced that production problems would delay delivery of its A380 superjumbo airliner, the world's biggest civilian aircraft.

    The news, coupled with a profit warning, sparked huge losses in EADS shares on Wednesday, when the group saw more than a quarter of its market value disappear.

    EADS subsequently regained some ground and on Friday closed with a loss that was limited to 0.50% at 19.90 euros.

    Over five days however, the group's stock shed 25.05%.

    On Friday, Forgeard fought back against suggestions he may have acted improperly when he sold shares in EADS worth millions of euros in March, almost three months before the delays were announced.

    His children and five other senior EADS officials also sold significant numbers of shares in March for several million euros.

    No information

    "I had no privileged information," Forgeard insisted in a radio interview, adding that when he sold the shares he had been unaware of the difficulties with the A380 programme.

    He said he learned only in April about the production delays.

    "During a meeting in May, it seemed possible that the teams would be able to make up the delay," he said.

    Forgeard, the French co-chief
    executive, sold shares in March

    "An in-depth analysis had been going on since the affair was discovered, which terminated  on June 13 with the conclusion that we published the same day."

    EADS too asserted there had been no irregularities in the stock sales.

    But amid the gathering controversy, the French financial markets regulator AMF said on Friday it had been investigating trading in EADS shares "for weeks".

    "The most recent events will be examined in the framework of  this investigation," the AMF said in a brief statement.

    An AMF probe had been sought by an association of minority shareholders in France, known as ADAM.

    The problems at Airbus and within EADS have also drawn attention to apparent breakdowns in internal communications and to the way the group kept customers and shareholders informed of production issues.

    Blame game

    Forgeard, who headed Airbus until 2005, on Wednesday implicitly implicated his German successor at the aircraft manufacturer, Gustav Humbert, saying: "During my time at Airbus we never missed the  projections we gave."

    Industry analysts in Germany said Forgeard's remarks could  exacerbate Franco-German tension at EADS.

    German executives have been
    silent on Forgeard's troubles

    They noted that Forgeard's German counterpart at the group, co-chief executive Thomas Enders, and other German executives have been strangely silent since the storm broke on Tuesday, leaving it to Forgeard to face the music.

    German-US auto giant DaimlerChrysler also said on Friday it had known nothing of the production delays when in April it sold a large package of shares in EADS, which owns 80% of Airbus.

    Forgeard also said on Friday that the production setbacks stemmed  from "certain factories" with "a fairly large concentration of problems" in Saint-Nazaire in northwestern France and in the German city of Hamburg.

    He added that the delays were due to problems with the A380's control and alert systems.

    'A lesson to us'

    Forgeard, who said he wanted to stay on in his job at the helm of EADS, told his radio interviewer that this week's events "should  serve as a lesson to us".

    "One always learns as much from one's failures as from one's  successes ... . After the battering which we've just had, all the elements are in place for us to pick up the pieces."

    Airbus also got a vote of confidence on Friday from Jacques Chirac, the French president.

    "One always learns as much from one's failures as from one's  successes ..."

    Noel Forgeard,
    EADS Co-Chief Executive

    "The company is entirely mobilised," he said on the  sidelines of an EU summit in Brussels. "I have every confidence in  it.

    "Airbus is a very big European project. There are delays to the  A380 but they shouldn't be exaggerated. With so technical and  complex a problem, it's easy to imagine that there are delays ...

    "I have no worries about the A380 and the conditions for the  technical solutions that will be applied to these problems."

    Laurance Parisot, president of France's largest employers' union Medef, on Friday voiced "total confidence" that the country's financial market regulators AMF would "clarify" the circumstances of EADS chiefs shares activity in advance of the plunge in the stock price.



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