Qioptiq logo Raytheon Global MilSatCom



09 Dec 13. The FT reported today that EADS is to cut between 5,000 and 6,000 jobs at its defence businesses and close its Paris headquarters as it tries to lift its lagging profit margins and deal with the steep reduction in European defence spending, according to one person familiar with the matter. The cuts are less deep than unions had feared and the reductions will be voluntary, making it more likely Europe’s largest defence and aerospace company will get the approval of unions, which is particularly important in Germany.

EADS, whose main headquarters are in Toulouse and which is listed on the Dutch stock exchange, was not immediately available to comment. Unions had already gearing up for a fight, fearing the company might cut as many as 9,000 of the defence unit’s 45,000 jobs.

Tom Enders, EADS chief executive, had previously warned that adjusting to Europe’s deep defence downturn would hurt.

Cuts at EADS would hit hubs in Germany, France and Britain, with Spain largely spared because it had already been consolidated, one person close to the company said recently.

EADS is no longer going for growth in its defence business, which brings in €14bn of the company’s €56.5bn total sales. Instead, the focus is on improving profit margins, according to Marwad Lahoud, head of strategy.

The group’s profit margins severely lag behind those of its competitors. Margins at its Eurocopter helicopter division are 5 per cent, half those at AgustaWestland, its closest competitor.

At Astrium, EADS’s space business, they are 5.4 per cent, well below the comparable margins of Thales Alenia in Europe and Lockheed Martin and Boeing in the US. EADS’s lowest margins are at Cassidian, its defence business, much of which is in electronics. Last year, Cassidian’s margins were well below its peers at 2.5 per cent, suffering from writedowns and German budget cuts.

EADS has discussed its plans with key politicians and does not expect they will be foiled by national interests. The squeeze on government spending is so tight that Mr Enders and his peers expect Europe to develop no new significant pieces of defence equipment – such as a fighter jet or aircraft carrier – in the coming 10-15 years.
Nevertheless, the UK, France and Germany in particular are keen to maintain the capability to make critical weapons domestically, prompting them to keep a close watch on any job losses and plant closures at EADS and other defence suppliers.

Back to article list