European Aeronautic, Defence & Space Co. said it will shift work to non-European countries including Tunisia as it seeks 1 billion euros ($1.4 billion) in cost- savings, two-thirds from its planemaking unit Airbus SAS.
The plan, meant to help EADS cope with a weak dollar relative to the euro, runs through 2012 and won't include any fresh job cuts, Toulouse, France-based Airbus said in a statement today after a presentation to its European Work Council.
EADS's existing Power8 program is designed to save 2.1 billion euros by 2010. Under today's extension, the size of which had already been announced, Airbus is required to save 650 million euros and other EADS units some 350 million euros, partly by moving engineering and manufacturing outside Europe.
``We're planning to produce basic parts in Tunisia, while research and production of more sophisticated parts and composites would be in Europe,'' EADS spokeswoman Gaelle Pellerin said today, confirming comments made by Chief Executive Officer Louis Gallois. Airbus is already building an assembly line in China for A320-series single-aisle jetliners and plans to ``increase its presence in India,'' Gallois said.
EADS, which is based in Paris and Munich, rose as much as 90 cents, or 5.9 percent, to 16.10 euros. The stock was trading at 15.80 euros as of 3:07 p.m. in Paris, reducing the decline this year to 28 percent and giving a value of 12.9 billion euros.
`Fairly Ambitious'
``These are fairly ambitious savings targets,'' said Zafar Khan, an analyst at Societe Generale in London with a ``sell'' rating on the stock. ``We thought that the 2.1 billion euros was in itself quite challenging given that lots of these reductions have to be undertaken in continental Europe, where employment conditions are generally quite protective.''
While order backlogs at Airbus are close to record levels, its profitability is under pressure from the euro's strength against the dollar, which squeezes the margin between revenue from planes sold in the U.S. and euro-denominated production costs. Tunisia, in north Africa, uses the dinar.
Airbus today forecast a 50 percent increase in plane output between 2007 and 2011. The company is already boosting A320 production to 40 a month by 2010 from about 37 now.
Boeing Strike
Competitor Boeing Co. is facing its own challenges in keeping down costs. Workers at the Chicago-based company's airplane division are in the third day of a strike over job security and compensation.
The International Association of Machinists and Aerospace Workers has stopped work at Boeing over three of the past six contracts, with strikes lasting four to 10 weeks. Boeing says a protracted dispute would keep its new 787 airliner from flying this year. Carriers have been counting on more fuel-efficient aircraft to help them battle the impact of record oil prices.
EADS chief Gallois said in July that the company would seek 1 billion euros in annual savings from 2010, in addition to the Power8 measures introduced in 2007. The CEO's comments on Tunisia and India were originally reported in Le Monde.
