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Tuesday, October 10, 2006

Airbus Crashing

The Wall Street Journal has a page one article by Daniel Michaels today about the resignation of Airbus' CEO. For those who haven't followed the struggles of Europe's giant aircraft manufacturer, the company has suffered significant setbacks lately in it's effort to produce a new line of jets. Design flaws, production problems and the business management problems endemic to Europe are dragging them down.

Their CEO of 3 months (!), Christian Streiff, resigned yesterday. Rather than the normal CEO resignation letter which keeps the company's skeletons firmly in the closet and mentions "time with family" and "exploring other opportunities" as the reason for leaving, Mr. Streiff says no one could handle that behemoth and structural changes need to be made.

In a letter to employees, Mr. Streiff pointedly blamed Airbus's complex structure for the tensions that have roiled the company over the past several days, writing: "I am leaving because I believe the position of Airbus CEO, in the current governance structure, has insufficient delegation to lead Airbus through the crisis successfully."
Whoa! There's a vote of confidence. If I was an Airbus investor, I'd be looking for the exits. The CEO just bailed out telling us we're all screwed, both now and in the future. Of course, the company could change it's structure, but this being ossified Europe that's about as likely as the board members becoming werewolves.

Mr. Streif was there for three months. That's about enough time to get a handle on the problems and find out where the executive washroom is. Resigning after three months indicates that he has so little confidence in the ability of the company to turn things around that he is willing to tar himself with a reputation of being a quitter rather than get dragged down with everyone else.

Wow.

Of course, there will be ample reasons for the Europeans to hate us in all of this.

Not long ago, Airbus appeared to be on the upswing, churning out popular planes and snatching orders away from Boeing. The U.S. aircraft maker had faced its own production and management crises in recent years. But Boeing, unburdened by a cumbersome multinational management structure, was able to move aggressively to make the tough decisions necessary to right itself, completely overhauling its airplane-manufacturing operations.
In contrast to this free-market resturcturing, how do you handle a corporate crisis in statist Europe?

EADS's split management -- with dual French and German chairmen and CEOs -- was created to avoid tipping the balance of power inside EADS toward France or Germany. Maintaining that balance has saddled Airbus with a clumsy division of labor between French and German factories. The arrangement has helped preserve jobs in both countries over the years, but has proved costly in building planes.
No wonder he left.

Would the last person gainfully employed in Europe please turn out the lights as they leave?

The Feline Theocracy's College of Cardinals at No Pasaran have a take on this as well. They also found a cool graphic for their post.

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