European aerospace giant faces the prospect of another turbulent transition period, with extensive personnel changes and a possible realignment of its shareholding structure.
The personnel upheaval could be even greater than what was already expected.’s long-serving sales chief, John Leahy, says he may depart the company next year in addition to the anticipated leadership transition at the top of EADS and Airbus.
Leahy, currently the chief operating officer for customers, has been one of the constants at the organization, even when other managers were reshuffled. During the last major period of turbulence at EADS and Airbus, in 2006, whenproblems led to the ouster of EADS CEO Noel Forgeard and the aircraft-making unit suffered the departure of two CEOs—Gustav Humbert and, 100 days later, Christian Streiff—Leahy is credited with managing relations with customers.
What’s more, Leahy’s deep connections with airline customers have led him to serve as a sounding board for Airbus about the health of the business. That role came into particularly sharp focus in 2007 and 2008, when Airbus andwere confronting a global recession and trying to gauge the impact on deliveries and production rates. Even as outside analysts and leasing companies spoke of the necessity for deep cuts, Leahy urged moderation. Reality proved him right, but he bristles at overly negative forecasts made by analysts—who, he feels, created uncertainty throughout the industrial supply chain.
The question of who may eventually succeed Leahy has long been an issue of speculation within Airbus and the wider airframer community, not least because of the American’s sometimes controversial persona. One often-named candidate is Nico Buchholz, who heads’s corporate fleet. Buchholz is a former Airbus executive and longtime Leahy acquaintance.
Leahy’s departure will occur around the time when EADS CEO Louis Gallois’s term expires—next summer. Transition plans call for Airbus CEO Tom Enders to take over; his job would be filled by Airbus COO Fabrice Bregier. But EADS is not waiting until 2012 for the musical-chairs scenario to begin:CEO Lutz Bertling’s mandate will expire this year, although it may be extended.
Most of the personnel changes at the top will remain uncertain, however, until a much bigger problem is solved: Daimler, one of the organization’s main shareholders, has indicated it would like to sell its stake sooner rather than later, according to industry sources. Daimler, like the French government, currently holds 15%; 7.5% each is controlled by the Lagardere Group and a consortium of mainly German banks headed by state-owned KfW. Spain has 5.4% .
The situation is complicated by the fact that, in addition to Daimler, Lagardere and the German banks also want to sell. That would effectively leave the French government as the controlling shareholder—an arrangement the Germans would not accept.
The German federal government has begun talks about EADS’s future and expects to review the situation next week. The ruling coalition appears to be divided on the issue. While the conservative Christian Democratic Union and centrist Free Democratic Party are opposed to the state taking a direct stake in the company, the third partner—the Christian Social Union (CSU) would support such a move, sources in Berlin say. The CSU’s reach is limited to the state of Bavaria, where it is by far the strongest political power. Many EADS facilities are based there, among them the corporate headquarters in Ottobrunn near Munich. Unlike in France, German federal governments have kept out of direct company shareholdings since the early 1990s. The only remaining major asset is Deutsche Bahn railways.
According to industry sources, the government may try to push the bank consortium into taking over the Daimler shares. However, the banks’ agreement for their own 7.5% stake expires by the end of 2012, when the shares would be returned to Daimler. The automaker is understood to be pushing for its own transaction to be completed before the end of 2011.
There have also been behind-the-scenes talks about a possible industry-wide foundation that would be controlled by other German aerospace companies and banks. But that’s an unlikely solution, given the size of the investment needed. The 7.5% held by the banks amounted to €1.5 billion at the time, or roughly $2 billion at today’s currency rates.
Gallois has proposed the introduction of a “golden share” to solve all the problems, but that’s prohibited under Dutch law, and EADS is a Netherlands-registered company. Also, such an arrangement would likely not be approved by the European Commission.