Taming the Many Masters at EADS

Tom Enders must juggle diplomacy and commerce at Airbus’s parent

Tom Enders, the former German paratrooper who has led Airbus since 2007, loves to make a splash. To show off his military skills he once skydived off a plane’s loading ramp at 10,000 feet. His disapproval of Germany’s absence from the Libyan liberation campaign led Enders to quit Angela Merkel’s Christian Democratic party. And last year he quipped that Boeing executives might be a bunch of dope-heads.

That bluntness risks putting Enders on a collision course with his government shareholders. In May, Enders will move up to become chief executive officer of Airbus parent European Aeronautic, Defence & Space, an aerospace company partially owned by the governments of Germany, France, and Spain. His challenge will be to rationalize a diverse collection of aviation and defense assets stitched together a decade ago, while keeping his state investors happy. “He’s a straight talker who sometimes ruffles feathers, and he needs to be like that, to steer a ship between politics and a very complex business,” says Michael Fuchs, the chief economy parliamentary spokesman for Merkel’s political party.

Enders’s predecessor, Louis Gallois, a former trouble-shooter for the French government, used diplomacy and humor to ease conflicts at Europe’s No. 1 aerospace company. Enders’s style has been more hard-edged. His months of tough negotiations over funding for the A400M military airlifter and threats to abandon the plane so alienated then-German Defense Minister Karl-Theodor zu Guttenberg that the politician publicly snubbed Airbus’s maiden flight of the aircraft in Germany in 2010.

“His company is a political construct and dependent on government orders for important divisions of its business, yet he acted as if he was the manager of a family company,” grouses Hans-Peter Bartels, a member of the German Parliament’s defense committee. “His demands and threats were frankly absurd and an affront.”

Enders, the son of a shepherd from rural western Germany who attended the University of California at Los Angeles before getting a PhD in Bonn, is inheriting a company more dominated by government investors than at any point in its 12-year history. Germany took on a larger role in November when it committed to purchasing a 7.5 percent stake from carmaker Daimler —a move Enders derided as overbearing state involvement.

EADS has kept voting control largely to Daimler and Paris-based publisher Lagardère, which also votes the French government’s 15 percent share. (The Spanish state has a 5.44 percent voting stake, too.) Both Lagardère and Daimler have been clear they want out at some point, even as Lagardère General Partner Arnaud Lagardère prepares to become EADS chairman. EADS promised Lagardère the role in 2007, in a Franco-German management power-sharing arrangement that long has stipulated that Germans report to French, and French to Germans.

“That agreement on voting control is a huge impediment to making EADS a true, public company,” says Hans Weber, CEO of aviation consultant Tecop Intl. “EADS will need more equity flowing into the company for investment, but how do you get major shareholders to invest if an investment doesn’t bring voting rights?”

Once Enders assumes his new role, he’s likely to seek growth in the U.S., which now provides less than 3 percent of its non-Airbus revenues. Airbus only assembles civilian aircraft in France, Germany, and China. A fourth line in the world’s largest aircraft market would help smooth out currency swings and provide additional capacity needed as Airbus seeks to boost production of its popular A320 jetliner.

“That’s one of their key challenges, setting up a production base for Airbus in the U.S.,” says Emmanuel Soupre of private bank Neuflize OBC in Paris. “Doing that for Airbus would help them better hedge between dollar-based sales and production costs.”

— With assistance by Benedikt Kammel


    The bottom line: Airbus chief Tom Enders is taking over at EADS, part-owned by three European governments. He’ll need political savvy to thrive.

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