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EADS Announces Name Change, Restructuring

Jul. 31, 2013 - 02:47PM   |  
By ANDREW CHUTER   |   Comments
EADS CEO Tom Enders says the company's restructuring and name change — to Airbus Group — are a response to market conditions. (Eric Piermont / AFP)
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LONDON — EADS is pulling its defense, space and military airlifter activities into a single division as part of a restructuring that will see the whole company adopt the name of its core commercial aircraft building operation.

Reorganization of defense and space operations was the most significant part of restructuring moves announced Wednesday that will see Europe’s premier aerospace company renamed the Airbus Group and its operations split into three divisions.

Gone are the Cassidian, Astrium and Eurocopter brands. In their place come Airbus Defence and Space, Airbus Helicopters and Airbus itself, which will be responsible for commercial aircraft activities.

In a statement, EADS said pooling the space and defense entities is the group’s response to the changing market environment marked by flat or shrinking budgets in the Western hemisphere.

“This structural change will provide optimized market access, cost and market synergies, and improved competitiveness overall. It will provide better visibility,” EADS said.

At the same time the company rolled out its restructuring plan, EADS reported first-half figures showing a 31 percent rise in net income, to 759 million euros (US $1 billion), on revenue increases up 6 percent, to 26.3 billion euros.

Most of that was due to the commercial airliner business, which recorded first-half revenues up 1.4 billion euros, to 18.2 billion euros.

By contrast, overall defense revenues were static at 5 billion euros.

Cassidian, the dedicated defense business that also includes the EADS share of the Eurofighter, accounted for 2.2 billion euros of that.

At 48.2 billion euros, the order book for defense was down compared with the end of 2012’s figure of 49.6 billion euros.

EADS CEO Tom Enders said that overall, the changes are an “evolution not a revolution; it’s the next logical step for our company .... The renaming simply gathers the company under the best brand we have.”

Enders said the restructuring and focus of the defense and space activities were done to “take costs out, increase profitability and improve our market position.”

The new defense and space division will be headquartered in Munich, have annual revenues of around 14 billion euros and employ 45,000 people.

Based on first-half 2013 figures, the Astrium space business will be the largest revenue contributor to the new division with revenues of 2.8 billion euros, followed by Cassidian with 2.2 billion euros and Airbus Military at just more than 1 billion euros.

The move to put Cassidian’s Eurofighter and unmanned air vehicle activities into the Airbus Military Aircraft business alongside the airlifter and tanker platforms will alter the balance of revenues contributed by the individual business units.

Eurocopter’s military helicopter activities will remain outside the new defense and space operations.

EADS said in a statement released Wednesday that it was necessary to maintain the strong synergies between civil and military products on the rotorcraft front.

Airbus military aircraft activities, based in Spain and covering products such as the A400M airlifter and A330 airtanker, will be moved under the umbrella of the new defense and space operation.

Current Cassidian boss Bernhard Gerwert will lead a new defense and space operation split into military aircraft, space, equipment and communications, intelligence and security systems business units.

Analysts here are expecting a possible shake-out of non-core activities and job losses as the defense and space operations move to improve performance in the face of difficult market conditions in Europe and the US.

The changes come just 10 months after an attempted merger with European defense giant BAE Systems to create the world’s largest aerospace and defense group fell foul of German government objections.

Failure to cement that deal triggered the review of EADS’ operations, particularly on the defense front, where the company lags global rivals such as BAE, Boeing and Lockheed Martin.

EADS had already engineered one significant change since the merger failure when the French, German and Spanish governments, which are significant shareholders, diminished their influence over the company by giving up blocking rights on management decisions.

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