Seems like only last week that we heard EADS co-CEO Noel Forgeard proclaim that he was not going to resign. Never. Ever.
Actually it was last week.
But obviously someone finally sat Forgeard down and explained the "Don Carty" facts of life to him the end of last week, as Sunday it was announced that both Forgeard and Airbus CEO Gustav Humbert had resigned over the Airbus A380 DelayGate scandal. All I can say is I would not have wanted to be in the room with Forgeard and the folks from DaimlerChrysler the last time they met. (Daimler Chrysler AG is EADS's largest shareholder, and it has been reported that the company had been putting heavy pressure on Forgeard to resign for two weeks.)
Forgeard will be replaced by Louis Gallois, the 62-year-old head of the French railway system and a former senior executive at two French aerospace companies.
Humbert will be succeeded by Christian Streiff, 51, who most recently worked at the French company Saint Gobain Cristaleria, EADS said Sunday in a statement.
The company's decision to continue to go with split management team has not been met with overwhelming approval by many close observers or the EADS debacle.
"The major shareholders clearly recognized the need for change, but this is like treating a broken leg with a band-aid,'' said Doug McVitie, managing director of Arran Aerospace, a forecasting company based in Dinan, France in a Bloomberg article Sunday. "They need to streamline the management structure and have one CEO with complete authority. That they haven't done yet shows this is still a Franco - German political entity.''
While Humbert threw himself under the (Air)bus more as a symbolic measure than anything else, I'd say Forgeard is in the much more precarious position here, having personally profited from some very suspect stock sales in March. Forgeard, as well as other members of his family, sold 5.2 million euros ($6.6 million) of EADS shares, giving him 2.5 million euros ($3.2 million) in gains. Forgeard, of course, contends he knew nothing about the probable additional delays in the A380 delivery schedule at the time. Instead, he said in a statement that the sales were done with "strict respect for ethics and the rule of law.''
The AMF, which regulates the stock market in France, is investigating these sales, as well as others undertaken by other EADS officials during the same time period.
Meanwhile, today, Britain's BAE Systems said that it has told Airbus it will undertake a full audit of the Airbus Group.
Talk about bad timing.
BAE was scheduled to sell its 20% stake in the European planemaker in June. However, with shares of EADS sinking as a result of DelayGate -- a valuation performed for BAE over the last week came in well below the expected price BAE had expected to make on the sale. Prior to the DelayGate news breaking, it had been expected that BAE could pull in as much as 5 billion euros ($6.6 million) on the deal.
But the valuation this last weekend not only was below that figure, it was below the 3.5 billion euro ($4.5 million) value the 20% stake carries on the EADS balance sheet.
BAE said in a statement today that it is in their shareholder's best interest to conduct the audit, to determine the best course of actions for its shareholders.
It is anticipated the audit will be completed by the end of August.
What a mess.
We still think one of the best takes of DelayGate so far came from Richard Aboulafia, analyst with the Teal Group. Here are two excerpts from his recent take on the issue.
"What’s bizarre about the recent Airbus A380 announcement is its excuse.'Some wires are tough to install. So production will be cut by 70% next year, and the delays will continue after that.'Damn that Radio Shack.
This is the dumbest effort to deflect blame for the disaster (okay,second dumbest; first prize goes to Noël Forgeard’s pinning the blame on Gustave Humbert: 'Mon Dieu! Leave the company in this German’s hands for a few months and this happens!'"
Later he adds, "The situation was bad enough before the new delays. The new schedule implies an ongoing ulcer that distracts from the other 90-95% of the market. In the interests of fairness, here’s some free (and obvious) advice to Boeing: as soon as the 787 is out the door, launch the 797 narrowbody. Do to the A320 what the 777 and 787 are doing to the A330/340."
"To sum, if there is no hope of quickly turning the A380 into a competitive plane with decent economics and then shifting design and production resources to more important segments, kill it.
The write-offs and political shame will be terrible. But national, continental, and corporate pride should have nothing to with what is essentially a business decision. More importantly, the alternative — to keep going and risk losing everything—is worse."