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Airbus : Still An Example Of Industrial Cooperation Across Europe ?

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Airbus Industrie was formally set up in 1970 following an agreement between French and German companies and joined by a Spanish company in 1971. Each company would deliver its sections as fully equipped, ready to fly items. It was a fairly loose alliance but that changed shortly after major defence mergers in 2000. DaimlerChrysler Aerospace (German), AÐ"©rospatiale-Matra (French) and CASA (Spanish) merged to form EADS. In 2001 BAE Systems (formerly British Aerospace) and EADS formed the Airbus Integrated Company to coincide with the development of the new Airbus A380 which will seat 845 passengers and be the world's largest commercial passenger jet.

At this time Airbus was effectively an example of industrial cooperation across Europe, the company employs around 57,000 people at sixteen sites in four European countries: Germany, France, the United Kingdom, and Spain. Final assembly production occurs at Toulouse (France) and Hamburg (Germany), and the group opearates with two Co-CEO’s one French and one German and two Co-Chairman (Lagardere and Bischoff).

But this system has met its limits, years after years a lot of internals problems have pilled up and the announcement of a further delay in the delivery of its A380 have revealed the bad situation of Airbus. Today the problems of EADS (parent company of Airbus) are an object-lesson in the dangers facing a company when government lacks a coherent industrial vision.

Since its conception the EADS management structure has respected the political arrangement for control of the group whereby French and German executives and traditionally the workforce at the aircraft manufacturer is geographically distributed in proportion to national ownership stakes. It is hard to make sense of this from the point of view of productive efficiency. It is an instance of economic nationalism, whereby governments distort private transactions among economic actors by discriminating against foreigners in the name of the national interest.

Economic motives include the preservation of employment or the attraction of economic activity to a certain area. Strategic motives include national security or attempts to capture rents abroad in monopolistic markets. In many circumstances the patriotic approach proves ineffective because it conflicts with economic efficiency, but its endurance derives from protection of the interests of local lobbies.

Furthermore the damage caused by economic nationalism includes inefficiency and poor corporate governance. For example the co-management structure of EADS has been established in spite of the fact that tensions flourished because of many reasons, reciprocal mistrust between French and German industrials about their jobs quality, but also cultural problems because it’s not always easy to make work different nationalities together insofar as each one try to put forward the interest of it’s own country, factory and employees.

As a result, Airbus's reputation has been dented and it has fallen behind Boeing. In other cases, cost-cutting measures are delayed as state aid comes to the rescue of the champion, or competition is distorted because government-supported companies have privileged access to infrastructure and procurement contracts. The market for corporate control suffers as takeover threats from potentially more efficient foreign



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