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Fri, Jun 23, 2006 - Page 10 News List

Franco-German political dispute threatens EADS

THE GUARDIAN , BRUSSELS

A fierce political row between France and Germany over the ownership and management structure of EADS, the majority owner of Airbus, threatens to destabilize the pan-European aerospace and defense group and plunge it into a new crisis as the clamor for the dismissal of Noel Forgeard, co-chief executive, grows.

Yesterday, the German government and DaimlerChrysler, which owns 30 percent of EADS, dug their heels in and insisted that the "shareholders' pact" on the group's ownership and dual-national executive team be kept at all costs. The 1999 pact gives 15 percent ownership to France and the same to the Lagardere media group.

This was in response to the demands of senior French ministers, including Premier Dominique de Villepin, for the French state to be given a greater ownership and management role -- and, according to Le Figaro, Airbus to be made a subsidiary of EADS under a single group chief.

A spokesman for the federal economics ministry in Berlin said: "This [the agreement] cannot be put into question."

He conceded that Economic Minister Michael Glos was in regular contact with ministers and executives over the issue.

Glos is understood to have seized on public comments by French transport minister Dominique Perben upholding the Franco-German pact on EADS. But Perben is a lone voice among ministers and leaders of the UMP governing party, with Guy Teissier, chairman of the national assem-bly's defense committee, demanding a rewriting of the pact in favor of the French state -- especially once the UK's BAE Systems sells its 20 percent Airbus stake to EADS.

Daimler refused to comment on the demands of De Villepin and Thierry Breton, the French finance minister, but officials in Stuttgart insisted the pact remained in place.

They made it plain that the group, which is selling 7.5 percent now and looking to sell a further 7.5 percent later, saw a 15 percent stake in EADS as "core to our long-term strategy."

The French government's proposals have provoked alarm at EADS. Executives are understood to be aghast at plans for a greater state role -- just when they are trying to sort out the technical problems on the A380 superjumbo that provoked the crisis, decide whether to go ahead with a redesigned A350 mid-sized airliner and reform production and management.

"The French have finally got to understand that this cannot be a state-run but a normal business," an insider said.

"This cannot drag on for six months or a year as there are three major problems to be sorted out which cannot wait for a political solution," he said.

Forgeard's position, meanwhile, became increasingly untenable following revelations that he, his family and other executives exercised multimillion stock-options not long before the A380 problems became known. Teissier said he would have to resign if the French financial regulator found him guilty of insider-dealing.

Perben implicitly criticized the share-dealings, which are viewed as an intolerable Anglo-Saxon import in France.

Appac, the French small shareholders' group, said it had lodged legal action over alleged insider-dealing against those who exercised stock options in March.

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