Louis Gallois is fed up with flags. When he took over as chief executive of Airbus last October, an early edict was to ban the use of national symbols in PowerPoint presentations.
"I said I don't want to see any flags on slides, because when you have a flag you have always an issue of national identity," Gallois, a Frenchman, said over lunch recently at company headquarters in Toulouse. "I want, when I am in Hamburg, to feel at home like in Toulouse."
At any other enterprise, this might seem like nit-picking. But for Airbus, the shedding of national identities among its French, German, British and Spanish employees is no small matter.
"It is because of national pride that we have the problem of the A380," Gallois said.
It has been nearly a year since Airbus and its parent, the European Aeronautic Defense and Space Co (EADS), announced a major delay in producing its new flagship, the A380 superjumbo jet. The multibillion-euro bungle threw company management into turmoil and ignited a firestorm of cross-border recrimination that still affects many working relationships, from the executive suite to the shop floor.
Despite the upheaval, analysts say Gallois, the third chief executive in 12 months, has made important progress toward putting the company back on track. But healing such rifts is a challenge that he concedes he did not fully anticipate.
"It was a discovery," said Gallois, 63, who was chief executive of Aerospatiale Matra, a founding member of the original four-nation Airbus Industrie consortium, before spending a decade as the head of the French national railroad, the SNCF.
The consortium consisted of Aerospatiale, DaimlerChrysler Aerospace of Germany, Construcciones Aeronauticas of Spain and BAE Systems of Britain.
For almost 30 years, each country has been designated as a "center of excellence" for different parts of the aircraft manufacturing process. Avionics work, for example, is allocated to the French; Germans specialize in cabin design and installation; wings are made in Britain, and tail sections are built in Spain.
BAE sold its stake in Airbus to EADS last year, though Airbus retained a large presence in Britain, with about 12,000 employees. But when the rear-fuselage sections of A380s built in Hamburg began arriving in Toulouse in 2004 without the requisite electrical wiring for the planes' in-flight entertainment systems, the bottlenecks revealed that the computer modeling software used by the company's German site was incompatible with that used at its French site.
Worse, the engineers scrambling to fix the problem in each country did so in different ways, while top managers and union leaders on each side sought to place the blame on the other. The result was a devastating two-year delay in the A380 that was expected to erase more than 4.8 billion euros (now US$6.48 billion) of profit over the next three years for EADS.
Gallois said he is determined to make sure that this never happens again. Early next month, he intends to present unions with a plan to overhaul the company. The goal is not only to unify administrative functions like human resources, information technology and procurement, but also to integrate all aspects of aircraft design and manufacturing.
"We cannot afford to pay twice" for the errors that led to the A380 crisis, he said. "I think it is the right time to change."
Gallois says this will involve a revolution in thinking and means transferring certain jobs to different locations in Europe. But he is determined to create "true transnational teams," he said, "because when people are working all together as professionals, there is no problem of nationalities."
The planned reorganization will represent a second phase of a broader cost-cutting program announced in February that foresees the loss of 10,000 jobs across Europe in the next four years and the sale of as many as six factories. Airbus workers in France and Germany have already conducted protest strikes, and politicians are seeking to minimize the impact in their constituencies.
Analysts said the new phase could prompt fresh protests.
"They've had quite a bit of industrial strife at Airbus already, but it is by no means over," said Howard Wheeldon, senior strategist at BCG Partners in London.
The efforts to integrate Airbus will do little to address the continuing political divisions at the parent company. Under the terms of a shareholder pact negotiated in 2000, the French state holds an indirect 15 percent stake in EADS, while the conglomerate Lagardere owns 7.5 percent. These holdings are balanced by a 22.5 percent share of the voting stock held by DaimlerChrysler, which represents German interests in the group. The Spanish government owns 5.5 percent of EADS.
Management responsibility is shared by French and Germans: Gallois, in addition to running Airbus, is EADS co-chief executive, along with Thomas Enders, 49, a former executive at DaimlerChrysler Aerospace.
By all accounts, the two work extremely well together, with Gallois taking primary responsibility for Airbus and Enders focusing on the military activities of EADS. But Gallois lamented the effect this dual governance had on the EADS corporate culture.
"Inevitably, when you have a French CEO and a German CEO, you have a French camp and a German camp," Gallois said.
Untying the EADS knot will hardly be simple. French President French President Nicolas Sarkozy has hinted that he may seek a renegotiation of the shareholder agreement that would allow, say, the French state to increase its stake or new shareholders to replace DaimlerChrysler and Lagardere.
During the French election campaign, politicians of all stripes argued that a larger French government presence in the management of EADS was the best way to preserve jobs at Airbus. Such talk predictably raised hackles in Germany.
Gallois said he was prepared to listen to Sarkozy's proposals but stressed that questions of ownership were for EADS shareholders to resolve.
"I am always interested by new ideas," Gallois said. "It could be interesting to hear what he has to say."
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