Airbus Chief Enders Rides Flight-Jacket Swagger to Clinch Top Job at EADS
Tom Enders, the German former paratrooper who leads Airbus SAS, loves to make a splash.
To show off the qualities of a military airlifter, he dived off the loading ramp at 10,000 feet. Disapproval of Germany’s abstention from the Libyan liberation campaign led Enders, 53, to quit Angela Merkel’s political party. Last year, he quipped that Boeing Co. (BA) executives might be a bunch of dope-heads.
The take-no-prisoners approach risks putting Enders, who was nominated yesterday to lead Airbus parent European Aeronautic, Defence & Space Co., on a collision course with government shareholders. His challenge will be to harmonize disparate aviation and defense assets stitched together a decade ago, while answering to investors dominated by the industrial interests of Germany, France and Spain.
“Enders is hard boiled, no doubt about that,” said Michael Fuchs, the chief economy parliamentary spokesman for Merkel’s Christian Democratic party. “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.”
Gallois, who is retiring, made his mark as a trouble- shooter for the French state, using diplomacy and often humor to ease conflicts at Europe’s biggest aerospace company. Gallois took the helm after EADS was rocked by multiple delays and cost overruns on the A380 double-decker that forced out his predecessor, Noel Forgeard, and depressed the stock price.
Together with Gallois, Enders stabilized the A380 program and gradually increased output while cutting costs. The effort paid off for shareholders. EADS stock has risen 8.6 percent in the last five years, compared with a 25 percent drop for Boeing.
For Enders, the U.S. remains a frontier with major growth potential, as EADS gets less than 3 percent of non-Airbus (EAD) revenues in that country. Airbus only assembles aircraft in France, Germany and China. A fourth line would help smooth out currency swings and provide additional capacity needed as Airbus seeks to further boost production of its popular A320.
“That’s one of their key challenges, setting up a production base for Airbus in the U.S.,” said Emmanuel Soupre who helps manage about $15.6 billion at Neuflize OBC in Paris. “Doing that for Airbus would help them better hedge between dollar-based sales and production costs.”
The son of a shepherd from the Westerwald rural part of Western Germany, Enders studied history and political science at the University of California in Los Angeles. He earned a doctorate later in Bonn, making him “Dr. Enders” in Germany, where business life remains steeped in title etiquette.
Enders speaks English with an American accent and not infrequently appears in public in aviator shades and a tan leather flight jacket draped over his lean, tall frame. His office is decorated with an image of Route 66, the iconic stretch of U.S. highway linking Chicago and Los Angeles. Enders declined to be interviewed for this story.
Enders inherits a company more dominated by government interest than at any point in its 12-year existence. Germany took on a larger role in November when it committed to purchasing a 7.5 percent stake from carmaker Daimler AG (DAI), a move Enders derided as overbearing state involvement. France owns a 15 percent direct stake in EADS, based in Paris and Munich.
Beyond the constraints of government ownership, EADS has kept voting control largely to Daimler and publisher Lagardere SCA (MMB), which also votes for the French government share. The Spanish state has a 5.44 percent voting stake.
Both Lagardere and Daimler have made clear they want out at some point in the future, even as Lagardere General Partner Arnaud Lagardere prepares to take the chairman’s role. EADS promised Lagardere the role in 2007, in a Franco-German power- sharing arrangement that stipulated Germans report to French, and French to Germans.
“That agreement on voting control is a huge impediment to making EADS a true, public company,” said Hans Weber, chief executive of San Diego-based 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?”
The company was created in 2000, combining Airbus with helicopter, satellite, combat jet, rockets, and missile assets of France, Germany and Spain largely to provide protection from the cyclicality of the airliner business. Boeing pioneered the approach with its 1997 purchase of McDonnell Douglas that balanced out commercial planes and military equipment.
Since its inception, EADS has suffered from the image as the industrial puppet of government interest. A years-long spat between the U.S. and Europe on aircraft subsidies that continues today left Airbus scrambling to fight off the stigma of a company propped up by state finances. U.S. lawmakers cried foul when EADS sought to sell refueling aircraft to the U.S. Air Force. The multi-billion-dollar contract went to Boeing last year, blasting EADS’s goal to build a beachhead in the U.S.
Following the tanker defeat, Enders may seek fresh avenues to build up EADS in the U.S., the world’s biggest military market and still the single-largest national market for commercial aircraft. Airbus scored a key victory last year when American Airlines agreed to buy A320 single-aisle aircraft, the first time in decades that it opted for the European company.
While Enders used his leadership skills at Airbus to get struggling production programs back on track, his tactics have alienated government allies. Months-long negotiations over the A400M military airlifter so alienated then-German Defense Minister Theodor zu Guttenberg that the politician publicly snubbed Airbus at the aircraft’s German maiden flight in 2010.
In the end Enders, aided by Gallois, got the additional financing he needed to continue with the A400M, the most expensive military program in post-war Europe. The price he paid was a political class affronted by his gung-ho maneuvering.
“Enders really annoyed a lot of people in government and parliament over the A400M,” said Hans-Peter Bartels, a member of the German parliament’s defense committee. “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! His demands and threats were frankly absurd and an affront.”
Enders can afford a dose of self-confidence because of his track record at Airbus. When he took over, the A380 was running two and half years late, mired in production difficulties stemming from previous management’s failure to harmonize German and French engineering teams around one design tool.
German on the Dance Floor
Under Enders, Airbus reorganized production, hiring 1,000 people in Hamburg to straighten out faulty cabling, even as Airbus was slashing 10,000 elsewhere to cut costs. Production rose from just one plane in 2007 to 26 in 2010, with 30 planned for this year. By 2015, Airbus wants to break even on the A380.
Despite a military bearing that makes him appear stiff in public briefings, he’s also learned to let his hair down when it counts. Enders boogied at a bar in Paris last year with a woman on each arm and a tie wrapped around his head when AirAsia BHD (AIRA) Chief Executive Tony Fernandes insisted that a contract signing for 200 planes last Valentine’s Day be preceded by festivities on the dance floor.
“Tom is in many ways direct like me,” Fernandes said. “If there are problems, he doesn’t run away from them he likes to stay and sort them out. It s been fantastic working with him over these years.”
His biggest victory yet was the introduction of an upgraded version of the best-selling A320 single-aisle jet at the end of 2010. Enders took his time studying possible manufacturing bottlenecks and costs to the project before giving the go-ahead at the end of 2010, only to watch the program turn into the fastest-selling jet in aviation history.
The success of the A320neo, as the new variant is called, put pressure on Boeing to follow suit with its competing 737. When Airbus raked in hundreds of orders at the Paris Air Show last year for the A320neo and Boeing stood on the sidelines, Enders took the stage at the show and asked the audience “what are they smoking at Boeing?” to be so slow in responding.
“He got into a role where there were a lot of issues within EADS and Airbus and he took all those issues on and has done a phenomenal job,” says Jeff Knittel, president of CIT Transportation Finance, one of the world’s five-biggest aircraft leasing companies.
Airbus’s open flank remains the A350 program, a composite- plastic aircraft slated to enter service in mid-2014 as a competitor to both the Boeing 787 Dreamliner and the popular 777 wide-body jet. Enders has described design and manufacturing of the jet as a “hellish ride,” and Airbus has already twice pushed back entry-into-service dates the most popular variant.
Enders has so far managed the market’s expectations on the A350 well. When Airbus announced a delay of as much as six months on the program in November 2010, the stock fell less than 5 percent. By comparison, EADS tumbled 26 percent in June 2006 under Forgeard when Airbus said the A380 would be late.
“I’ve been impressed with what happened under Enders at Airbus,” said Neuflize OBC’s Soupre. “He got along remarkably well with Gallois, and one got the feeling that it wasn’t an individual at the head of EADS or Airbus, it was a management task force. I imagine it’ll continue like that.”
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