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19 Dec 07. EADS and Airbus have selected Latécoère in France, GKN in the UK and MT Aerospace in Germany as preferred bidders for the sites of Méaulte and Saint Nazaire Ville in France, Filton wing component and sub-assembly manufacturing facility in the UK, and Nordenham, Varel and Augsburg in Germany. The EADS Board of Directors has authorized the management of EADS and Airbus to enter into negotiations with the preferred bidders on remaining issues and the required final due diligence with the target to achieve a final agreement as soon as possible. Substantial progress on the share purchase agreement is expected in the first quarter of 2008. The EADS Board sees this decision as a clear commitment of the management to the Power8 targets.

The partner selection for Filton will allow for an outright sale of the manufacturing part of the site to GKN. For the French and German sites, the agreement with Latécoère and MT Aerospace will take the form of joint ventures, in which Airbus will retain a substantial minority shareholding. Airbus has the option to withdraw completely after three years. The merit of the joint venture structure is to empower Airbus to closely monitor the transition during the period of A350 XWB development and convergence of definition, while reducing substantially EADS’ cash outlays. Under the joint venture agreements, Airbus does not intend to interfere in the majority shareholder’s management of each plant.

The Airbus plants targeted for divestment employ a total of 7,400 employees, and represent €1.4bn of Airbus’ cost base in 2007. EADS Defence & Security’s plant in Augsburg employs 2,000 employees and represents around €450m of its cost base in 2007. About 70 percent of the Augsburg plant’s revenues come from Airbus.

“The ongoing divestment of sites and the building of a network of partners for
Airbus allows EADS to focus its resources on core activities. It is a way to
optimise Airbus’ industrial set-up in the frame of the extended enterprise. At
the same time, it helps EADS to reduce financing needs in a period strained
by conjunction of costly programmes and weak dollar uncertainty,” said
EADS CEO Louis Gallois.

“This decision is an important milestone for Airbus’ new strategy and Power8 programme. We will work to progress and conclude the negotiations as swiftly as possible. At the same time, we can now begin to establish long term partnerships with three first tier suppliers for the A350 XWB, who will share workload, investment, risk and future benefits with us. The bidders will now be invited to the A350 XWB development plateau thus supporting the ongoing A350 development immediately,” said Airbus President and CEO Tom Enders. “This process will generate strong tier one partners for Airbus, and will allow the sites to further develop and acquire the required technologies to remain competitive in the future.”

The transactions are expected to be closed in summer 2008, when the sites will be effectively transferred to the new owners. Meanwhile, these sites will continue to produce their parts for the existing Airbus products (A320 Family, A330/A340 Family, and A380) for which Airbus has an order book of some 3,000 aircraft. The finalisation of transactions is subject to agreements on terms and conditions (such as governance issues, exit mechanisms, etc.) and the demonstration of satisfactory financing structures and backing by the buyers.

SBAC welcomed the confirmation that GKN plc is the preferred bidder and partner for Airbus and its Filton site. SBAC recognises GKN’s commitment to create a globally competitive UK centre of excellence for the design and manufacture of composite aircraft wing structures.

Ian Godden, SBAC Chief Executive said, “This new arrangement gives GKN a major role in the future of the UK aerospace industry and places a significant responsibility on them to maintain and enhance the UK’s role

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