BAE Systems sells stake in Airbus
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Originally Posted by eal401
Oh b*ll*cks!! You think Airbus are going to shell out millions of pounds rebuilding an existing facility elsewhere?? Given the scale of the 380 plant and issues with the programme, that is extremely unlikely.
The Independent (London) was kind enough to publish this, as their top letter, in bold print, on Monday 10 Apr, under the headline 'BAE's plan to sell Airbus share is betrayal of British aviation ethos'.
http://comment.independent.co.uk/let...icle356845.ece
They had it on Friday, and could have published on saturday, thus getting in before Will Hutton's excellent Observer article. Never mind, at least they published it.
Don't know if Mike Turner (CEO BAE Systems) reads the Indie, but I'm sure his press trawlers will have put it in front of him.
So, standing by for incoming. Although perhaps BAES will adopt the usual big organisation tactic of saying nothing and hoping it'll all go away.
Harrumph.
AirSound
http://comment.independent.co.uk/let...icle356845.ece
They had it on Friday, and could have published on saturday, thus getting in before Will Hutton's excellent Observer article. Never mind, at least they published it.
Don't know if Mike Turner (CEO BAE Systems) reads the Indie, but I'm sure his press trawlers will have put it in front of him.
So, standing by for incoming. Although perhaps BAES will adopt the usual big organisation tactic of saying nothing and hoping it'll all go away.
Harrumph.
AirSound
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Curious Pax: The difference is that with the Airbus wing work, there is a safeguard mechanism to sustain the work in the UK, specifically introduced in 2000/01 when the Airbus single company was created and for implementation as/when BAE sold its shareholding.
This mechanism protects the wing design, development and production work and has no end date. On completion of the sale of BAE's 20% shareholding this legally binding agreement will pass to the UK Government, at its request. Any change can only be made on economic grounds, not political, following analysis by financial institutions appointed by both parties.
Putting emotional arguements to one side, the reality is that since the creation of Airbus as a single business (rather than a collection of assets and employees from around Germany, France and Spain as it had been before) the sale of BAE's minority stake was always a possibility.
After a difficult start Airbus, as a manufacturer of quality commercial aircraft, has 'grown up'. With the A380, A350 and early spadework for an A320 series replacement, it is entering a new phase in its development. You could argue that BAE's divestment of its 20% shareholding is just a natural part of the Airbus story.
With just a 20% shareholding, BAE had limited management control/input and while Airbus has an excellent product line up and a superb market position, built up with the not insignificant support of Mike Turner personally and others at BAE, it is clear that significant and continued financial investment will be needed to keep it there.
You can hardly blame the Board of BAE for feeling that the capital required to support this, could deliver a better return to the company's shareholders if used differently. BAE has been growing steadily by acquisition as well as sales growth, year-on-year and the Company is clear in its ambitions for this to continue, both in the US and elsewhere.
In any case, despite some reports, you could hardly accuse BAE of turning tis back on commercial aviation. It may no longer produce commercial airframes but it does, through a lot of its individual businesses, supply a huge amount of navigation, communications, avionics, flight and engine control systems to both Boeing and Airbus.
This mechanism protects the wing design, development and production work and has no end date. On completion of the sale of BAE's 20% shareholding this legally binding agreement will pass to the UK Government, at its request. Any change can only be made on economic grounds, not political, following analysis by financial institutions appointed by both parties.
Putting emotional arguements to one side, the reality is that since the creation of Airbus as a single business (rather than a collection of assets and employees from around Germany, France and Spain as it had been before) the sale of BAE's minority stake was always a possibility.
After a difficult start Airbus, as a manufacturer of quality commercial aircraft, has 'grown up'. With the A380, A350 and early spadework for an A320 series replacement, it is entering a new phase in its development. You could argue that BAE's divestment of its 20% shareholding is just a natural part of the Airbus story.
With just a 20% shareholding, BAE had limited management control/input and while Airbus has an excellent product line up and a superb market position, built up with the not insignificant support of Mike Turner personally and others at BAE, it is clear that significant and continued financial investment will be needed to keep it there.
You can hardly blame the Board of BAE for feeling that the capital required to support this, could deliver a better return to the company's shareholders if used differently. BAE has been growing steadily by acquisition as well as sales growth, year-on-year and the Company is clear in its ambitions for this to continue, both in the US and elsewhere.
In any case, despite some reports, you could hardly accuse BAE of turning tis back on commercial aviation. It may no longer produce commercial airframes but it does, through a lot of its individual businesses, supply a huge amount of navigation, communications, avionics, flight and engine control systems to both Boeing and Airbus.
backseatjock
I appreciate your considered post to Curious Pax. However, I believe you’re missing the point of the letter in the Independent (post #63) and Will Hutton’s article (Fujiflyer’s post #50). In fact, I suspect that you may be a BAES person yourself, or at least a BAES shareholder. The point that you are missing is that BAES, and its earlier incarnations, has overseen the demise of one of the world’s great aviation industries - for short-term reasons of immediate profitability.
You say “It [BAES] may no longer produce commercial airframes but it does, through a lot of its individual businesses, supply a huge amount of navigation, communications, avionics, flight and engine control systems to both Boeing and Airbus.” But lots of national industries produce all those essential components, big and small. There were not many national industries that, in the second half of the last century, produced whole aeroplanes. Because of the short-term policies of BAES and its predecessors. Britain is no longer amongst that select few. Now, having thrown that inheritance away, and with the beancounters and shareholders in full control, BAES is now going to throw away one of its greatest successes in the part-building world as well - the uniquely successful Airbus wings.
What this does, as the Independent letter suggests, is to remove a source of inspiration for putative future aeronautical engineers and other workers. It turns an industry that people used to be proud to join into just another bunch of widget-makers. And for what? Apparently so that BAES can sever its European links and get further into an American industry that totally dwarfs it - an industry which consistently reveals its hard-nosed unwillingness to share any of its technology with foreigners.
It may be a canny commercial decision in the short term - but I believe it is a thoroughly anti-British decision for the future. Perhaps it’s a good thing BAES took the word ‘British’ out of its company name.
airsound
Paxing All Over The World
backseatjock
In that case, BAES have pulled off a fantastic coup and provided a fine incentive to encourage buyers. That is because, the buyer knows that they can easily relocate the business! In times gone by, it was always the Political case that had to be made and national interests were supported by many. Nowadays, it is always the Financial case that must be made and making a financial case to relocate the plant would be the easiest thing in the world.
Whilst I agree with much of what airsound says, there is no way of stopping it. If you wanted to stop it - then action had to be taken 35/45 years ago. This would have meant accurately projecting the way in which the western stockmarket would become prime and then preventing it from doing so.
Since the stockmarket has gained this position and the financial argument is the only argument that holds sway in Britain, then it is not possible to change the course of action. Within the industry other examples of financial imperatives holding sway are BAA, currently a lousy provider of passenger facilities - but rather good at developing shopping malls!
Recently, when the Rover car plant went into financial melt down, the UK govt attempted to stop it and provided cash to support the staff during negotiations. In one week they burnt several million pounds and no effect. They have been heavily questioned about that.
I suggest that 'economic grounds' will be as robust as the 'agreements and independent observers' that Rupert Murdoch so willingly agreed to when he bought The Times. In due course, all of them were overthrown, as these will be and Airbus will continue to contract towards Toulouse, for the main reason that it will make financial sense to do so. Oh yes, and political sense too for this French (not European) maker of aircraft. By the way, if you want to know how the Stockmarket will lose it's primacy, just wait for the next '1929' big crash.
...this legally binding agreement will pass to the UK Government, at its request. Any change can only be made on economic grounds, not political, following analysis by financial institutions appointed by both parties.
Whilst I agree with much of what airsound says, there is no way of stopping it. If you wanted to stop it - then action had to be taken 35/45 years ago. This would have meant accurately projecting the way in which the western stockmarket would become prime and then preventing it from doing so.
Since the stockmarket has gained this position and the financial argument is the only argument that holds sway in Britain, then it is not possible to change the course of action. Within the industry other examples of financial imperatives holding sway are BAA, currently a lousy provider of passenger facilities - but rather good at developing shopping malls!
Recently, when the Rover car plant went into financial melt down, the UK govt attempted to stop it and provided cash to support the staff during negotiations. In one week they burnt several million pounds and no effect. They have been heavily questioned about that.
I suggest that 'economic grounds' will be as robust as the 'agreements and independent observers' that Rupert Murdoch so willingly agreed to when he bought The Times. In due course, all of them were overthrown, as these will be and Airbus will continue to contract towards Toulouse, for the main reason that it will make financial sense to do so. Oh yes, and political sense too for this French (not European) maker of aircraft. By the way, if you want to know how the Stockmarket will lose it's primacy, just wait for the next '1929' big crash.
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airsound:
Will Hutton's article in the Observer was from a political standpoint - his own very strong political standpoint - which is what most of his writing seems to be. Sean Maffet's letter in the Independent would seem to be written from a rather different persective but, while I agree totally with the emotions he feels, it is a sad fact of life that in today's society no business can stand still.
The fact remains that BAE has had an investment shareholding in Airbus, giving it little management involvement, since 2000. On this basis, the eventual sale of its investment was expected by many industry observers for some time.
In deciding to sell the 20% stake absolutely nothing will change. The BAE shares will be bought by the company which currently owns the other 80%. Workers in Broughton and Filton already work for Airbus, not BAE and so the UK's involvement in the great Airbus success story will continue.
Picking your point about the loss of the British commercial aircraft manufacturing industry. The sad reality is that no matter how proud we feel about those aircraft types (and my old man made a living from flying some of them) latterly they were hardly a resounding global sales success and eventually just about finished off the company which made them or inherited the rights to them through industry consolidation.
No mud slinging from me towards BAE here, this problem was hardly unique to the UK. The commercial aircraft capabilities of McDonnel Douglas, Lockheed, Fokker, Saab and many others have all gone the same way and for the same economic reasons. Look too at the recent struggles for Bombardier.
As I am sure you know, no-one actually designs, develops and manufactures large commercial airliners successfully on their own these days. Even the mighty Boeing is relying heavily on Japanese involvement and investment to make the 787 happen.
Airbus has evolved into a mature business and as it prepares for entry into service of A380, development of both the A350 and eventual A320 series replacement, it is starting a new phase of this evolution.
I think you will find that post the sale of BAE's 20% stake, the UK will continue to have the same level of involvement with wing design, development and production for these new Airbus projects as it did when BAE was a shareholder. This involvement is something we can all continue to be proud of.
BSJ
PS: Re my employment, I have had involvement with campaigns to sell both military and Airbus aircraft, am a patriotic Brit and still have involvement in the industry today.
Will Hutton's article in the Observer was from a political standpoint - his own very strong political standpoint - which is what most of his writing seems to be. Sean Maffet's letter in the Independent would seem to be written from a rather different persective but, while I agree totally with the emotions he feels, it is a sad fact of life that in today's society no business can stand still.
The fact remains that BAE has had an investment shareholding in Airbus, giving it little management involvement, since 2000. On this basis, the eventual sale of its investment was expected by many industry observers for some time.
In deciding to sell the 20% stake absolutely nothing will change. The BAE shares will be bought by the company which currently owns the other 80%. Workers in Broughton and Filton already work for Airbus, not BAE and so the UK's involvement in the great Airbus success story will continue.
Picking your point about the loss of the British commercial aircraft manufacturing industry. The sad reality is that no matter how proud we feel about those aircraft types (and my old man made a living from flying some of them) latterly they were hardly a resounding global sales success and eventually just about finished off the company which made them or inherited the rights to them through industry consolidation.
No mud slinging from me towards BAE here, this problem was hardly unique to the UK. The commercial aircraft capabilities of McDonnel Douglas, Lockheed, Fokker, Saab and many others have all gone the same way and for the same economic reasons. Look too at the recent struggles for Bombardier.
As I am sure you know, no-one actually designs, develops and manufactures large commercial airliners successfully on their own these days. Even the mighty Boeing is relying heavily on Japanese involvement and investment to make the 787 happen.
Airbus has evolved into a mature business and as it prepares for entry into service of A380, development of both the A350 and eventual A320 series replacement, it is starting a new phase of this evolution.
I think you will find that post the sale of BAE's 20% stake, the UK will continue to have the same level of involvement with wing design, development and production for these new Airbus projects as it did when BAE was a shareholder. This involvement is something we can all continue to be proud of.
BSJ
PS: Re my employment, I have had involvement with campaigns to sell both military and Airbus aircraft, am a patriotic Brit and still have involvement in the industry today.
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PaxBoy:
I doubt whether it would be easy for anyone to relocate the Airbus UK businesses in Broughton or Filton! Think of the disruption to design and manufacturing work and the knock on effect for Airbus output, the loss of facilities in which some of Europe's most highly skilled engineers work (there is a shortage of such people globally), the loss of access to further repaybale launch investment from the UK Government and the fact that millions of pounds worth of investment in equipment and processes would have to be written off.
Not so sure that would present an economic argument that many, if any, would accept.
And, of course, the buyer will be EADS - which currently has management control over the business anyway.
I doubt whether it would be easy for anyone to relocate the Airbus UK businesses in Broughton or Filton! Think of the disruption to design and manufacturing work and the knock on effect for Airbus output, the loss of facilities in which some of Europe's most highly skilled engineers work (there is a shortage of such people globally), the loss of access to further repaybale launch investment from the UK Government and the fact that millions of pounds worth of investment in equipment and processes would have to be written off.
Not so sure that would present an economic argument that many, if any, would accept.
And, of course, the buyer will be EADS - which currently has management control over the business anyway.
Paxing All Over The World
bsj Fair enough, sounds like good reasons for it remaining in situ. For my part, I certainly hope so. My cynical view comes from 27 years in commerce, including the City.
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Airsound - Will Hutton is an idiot who does not understand economics let alone the intricaties of this deal. Although he may appeal to undergraduates with little grounding in economics, I can assure you that his grounding in economics (through his articles and books) appears to be highly naive and ill-advised.
