Airbus to Restructure Into Independent Firm

PARIS — Girding for battle with an even bigger Boeing Co., Airbus Industrie, Europe’s commercial aircraft maker, announced Monday that its four owners have agreed to refashion it into an independent, centralized company with its own assets and management by 1999.

The new management structure will take control of engineering, testing, production, procurement and customer service in addition to its current functions, which are limited to sales and marketing, the Toulouse, France-based consortium and its owners said in a statement.

Airbus said the new structure is designed to increase operational efficiency, make it easier to seek international partners and, in the longer term, open up Airbus to outside investment, possibly through issuing stock.

For months, the joint French, German, British and Spanish owners have been at odds about how to restructure Airbus into a classic corporation by the end of the decade. The memorandum of understanding signed Monday is a milestone, though thorny issues remain, among them exactly what the new company’s assets will be.

Industry analysts said the consortium is streamlining itself to better fight for market share against Boeing, which announced plans in mid-December to buy McDonnell Douglas, the industry’s No. 3 player.

“The new structure of Airbus must furnish the proof that we can make a European enterprise that is big enough to take on all the competition,” German Economy Minister Guenter Rexrodt said in a statement. Concentration underway in the U.S. aerospace industry makes it vital that the Europeans “do not stop halfway,” Rexrodt said.

Since its creation in 1970, Airbus has essentially been a sales agent for aircraft made by the companies that are its owners: Aerospatiale of France and Daimler-Benz Aerospace of Germany, each with a 37.9% share; British Aerospace, with 20%; and Casa, or Construcciones Aeronauticas of Spain, with 4.2%.

Under the status of a risk-sharing partnership, a legal structure invented in France to allow small wine growers to jointly market their crops, each of Airbus’ owners has been allotted work commensurate with ownership share.

Pressure, though, has mounted in recent years, especially from the British and Germans, to jettison the old formula of proportionate manufacturing in favor of a more traditional and streamlined company framework.

“The competition with Boeing is intense, and they see the need to get down their manufacturing costs to produce the greatest efficiency possible,” professor Trevor Taylor, a specialist on the European aerospace industry at Staffordshire University in Britain, told Bloomberg News.

Including McDonnell Douglas, Boeing now has close to a 70% share of the world jetliner market, compared with Airbus’ 30%. The European group has vowed to win 50% by the year 2000 or shortly thereafter.

Among other advantages, its new status will make Airbus freer to seek cheaper subcontractors outside Europe. Now the company’s four partners are also its key subcontractors, winning manufacturing contracts in proportion to their holdings.

“The agreement we signed is but the first step of a more global integration process of the European aerospace industry,” Aerospatiale Chairman Yves Michot told the Paris daily Le Monde.

Airbus said the partners will hold shares in the new company equal to their stake in the existing consortium. Transfer of assets “will depend on how far the assets are essential” to the new entity, an Airbus statement said. A valuation of the assets will be completed by the end of 1997, Airbus said.

“This is the real nitty-gritty: who pools what and how much it’s valued at,” said Barnaby Weiner, an aircraft industry analyst at Merrill Lynch in London.

British Aerospace reportedly expects its plants at Filton and Chester in Britain to be taken over by Airbus. Together, the plants employ about 4,000 of the 4,700 British Aerospace people working directly on Airbus planes.

Under the memorandum of understanding, the French have also agreed to spin off some of Aerospatiale’s facilities to the new Airbus, but months of tough bargaining lie ahead.

“We welcome the agreement of the Airbus partners,” Daimler-Benz Aerospace Chief Executive Manfred Bischoff said in a statement. “Nevertheless, difficult negotiations about how to implement the conversion still have to be conducted.”