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The European Aeronautic Defence and Space Company EADS N.V. (EADS) is a large European aerospace corporation, formed by the merger on 10 July 2000 of DaimlerChrysler Aerospace AG (DASA) of Germany, Aérospatiale-Matra of France, and Construcciones Aeronáuticas SA (CASA) of Spain. The company develops and markets civil and military aircraft, as well as communications systems, missiles, space rockets, satellites, and related systems. The company is headquartered in the Netherlands in Schiphol-Rijk.
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Encyclopedia
The European Aeronautic Defence and Space Company EADS N.V. (EADS) is a large European aerospace corporation, formed by the merger on 10 July 2000 of DaimlerChrysler Aerospace AG (DASA) of Germany, Aérospatiale-Matra of France, and Construcciones Aeronáuticas SA (CASA) of Spain. The company develops and markets civil and military aircraft, as well as communications systems, missiles, space rockets, satellites, and related systems. The company is headquartered in the Netherlands in Schiphol-Rijk. The company operates under Dutch law.
History
The 1997 merger of American corporations Boeing and McDonnell Douglas, which followed the forming of Lockheed Martin, the world's largest defense contractor in 1995, increased the pressure on European defense companies to consolidate. In June 1997 British Aerospace Defence Managing Director John Weston commented "Europe... is supporting three times the number of contractors on less than half the budget of the U.S.". European governments wished to see the merger of their defence manufacturers into a single entity, a European Aerospace and Defense Company.
As early as 1995 the German aerospace and defence company DaimlerChrysler Aerospace (DASA) and its British counterpart British Aerospace were said to be keen to create a transnational aerospace and defense company. The two companies envisaged including Aérospatiale, the other major European aerospace company, but only after its privatisation. The first stage of this integration was seen as the transformation of Airbus from a consortium of British Aerospace, DASA, Aérospatiale and Construcciones Aeronáuticas SA into an integrated company; in this aim BAe and DASA were united against the various objections of Aérospatiale. As well as Airbus, British Aerospace and DASA were partners in the Panavia Tornado and Eurofighter Typhoon aircraft projects. Merger discussions began between British Aerospace and DASA in July 1998, just as French participation became more likely with the announcement that Aérospatiale was to merge with Matra and emerge with a diluted French government shareholding. A merger was agreed between British Aerospace Chairman Richard Evans and DASA CEO Jürgen Schrempp in December 1998. However when the British General Electric Company put its defense electronics business Marconi Electronic Systems up for sale on 22 December 1998, British Aerospace abandoned the DASA merger in favour of purchasing its British rival. The merger of British Aerospace and MES to form BAE Systems was announced on 19 January 1999 and completed on 30 November. Evans stated that in 2004 that his fear was that an American defense contractor would acquire MES and challenge both British Aerospace and DASA.
Formation
DASA and the Spanish aircraft company Construcciones Aeronáuticas SA agreed to merge with the signature of a memorandum of understanding on 11 June 1999. On 14 October 1999 DASA agreed to merge with Aérospatiale-Matra to create the European Aeronautic Defence and Space Company. 10 July 2000 was "Day One" for the new company which became the world's second largest aerospace company after Boeing and the second-largest European arms manufacturer after BAE Systems.
In January 2001 Airbus Industrie was transformed from an inherently inefficient consortium structure to a formal joint stock company, with legal and tax procedures being finalised on 11 July. Both EADS and BAE transferred ownership of their Airbus factories to the new Airbus SAS in return for 80% and 20% shares in the new company respectively. In April 2001 EADS agreed to merge its missile businesses with those of BAE Systems and Alenia Marconi Systems (BAE/Finmeccanica) to form MBDA. EADS took a 37.5% share of the new company which was formally established in December 2001 and which thus became the world's second largest missile manufacturer.
On 16 June 2003 EADS acquired BAE's 25% share in Astrium, the satellite and space system manufacturer, to become the sole owner. EADS paid £84 million, however due to the lossmaking status of the company BAE invested an equal amount for "restructuring". It was subsequently renamed EADS Astrium. In November 2003, EADS announced that it was considering working with Japanese companies, and the Japanese METI, to develop a hypersonic airliner intended to be a larger, faster, and quieter, replacement for the Concorde, which was retired in October the same year.
Despite repeated suggestions as early as 2000 that BAE Systems wished to sell its 20% share of Airbus, the possibility was consistently denied by the company. However on 6 April 2006 BBC News reported that it was indeed to sell its stake, then "conservatively valued" at £2.4 billion. Due to the slow pace of informal negotiations, BAE exercised its put option which saw investment bank Rothschild appointed to give an independent valuation. Six days after this process began, Airbus announced delays to the A380 with significant effects on the value of Airbus shares. On 2 June 2006 Rothschild valued BAE's share at £1.87 billion, well below BAE's, analysts' and even EADS' expectations. The BAE board recommended that the company proceed with the sale and on 4 October 2006 shareholders voted in favour; the sale was completed on 13 October making EADS the sole shareholder of Airbus.
In March 2007 EADS Defence and Security Systems division was awarded an eight year, £200m contract to provide the IT infrastructure for the FiReControl project in the UK.
Recent activities
On 29 February 2008, the U.S. Air Force awarded a $35 billion contract for aerial refueling tankers (the KC-45) to Northrop Grumman, with EADS as a major subcontractor. The contract, one of the largest created by the Department of Defense, is initially valued at $35 billion but has the potential to grow to $100 billion. It is also a sign of the growing influence of foreign suppliers within the Pentagon and breaks a relationship that has lasted decades with Boeing, which had built the bulk of the existing tanker fleet and had fought hard to land the new contract.
Under the contract, Northrop Grumman and EADS would build a fleet of 179 planes, based on the existing Airbus 330, to provide in-air refueling to military aircraft, from fighter jets to cargo planes. While final assembly of the craft would take place at an Airbus plant near Mobile, Alabama, parts would come from suppliers across the globe.
However, the award was protested by Boeing, the other bidder on the project, which was upheld by the GAO. The Air Force announced a partial reopening of the bid, focusing on the eight (of nearly 110) areas where Boeing's protests were upheld, with a final decision due by the end of 2008.
Organisation
- Airbus
- Military Transport Aircraft Division
- Eurocopter
- EADS Astrium
- EADS Astrium Satellites
- EADS Astrium Space Transportation
- EADS Astrium Space Services.
- EADS Defence & Security
- Defence Electronics
- EADS Military Air Systems, including products such as the Mako/HEAT, and stakes in the following companies:
- Defence and Communication Systems
- MBDA (37.5%) missile manufacturer
Other units
Corporate governance
EADS' Executive Committee is headed by Louis Gallois, the EADS CEO. Other members are François Auque (Astrium), Lutz Bertling (Eurocopter), Jean Botti (Chief Technical Officer), Fabrice Brégier (EADS Operational Performance), Ralph Crosby (EADS North America), Thomas Enders (Airbus), Jussi Itävuori (Human Resources), Marwan Lahoud (Chief Marketing and Strategy Officer), Hans Peter Ring (Chief Financial Officer EADS and Airbus), Carlos Suárez (Military Transport Aircraft Division) and Stefan Zoller (Defence and Security).
The Executive Committee is appointed by the board of directors, itself appointed by Daimler AG and SOGEADE. Both appoint four directors plus one independent director. As of July 2003 SEPI no longer nominates a board member, but a Spanish director is retained as the 11th member. The board also appoints the company's chairmen, one from the Daimler nominated directors and from the SOGEADE nominated directors. As of September 2007 the Chairmen are Rüdiger Grube and Arnaud Lagardère. The other board members are Louis Gallois, Thomas Enders, Hans Peter Ring, Juan Manuel Eguiagaray, Michel Pébereau, Bodo Uebber, François David and Michael Rogowski.
In late 2004 Noël Forgeard (then Airbus CEO) was nominated by Lagardère as the next French CEO of EADS. Forgeard had suggested that this system should be abolished in favour of a single CEO in a move that DaimlerChrysler saw as an attempt to engineer a French dominated management team. Following protracted arguments, which caused embarrassment to EADS at the Paris Air Show, the appointment was confirmed by the EADS Board of Directors on 25 June 2005. At the same meeting the Board, in consultation with partner BAE Systems, named Gustav Humbert as President and CEO of Airbus.
Financial information
As of 3 July 2007 41.63% of EADS stock is publicly traded on six European stock exchanges, while the remaining 58.37% is owned by a "Contractural Partnership". The latter is owned by SOGEADE (27.38%), Daimler AG (22.41%), SEPI (5.46%) and Dubai Holding (3.12%). SOGEADE is owned by the French State and Lagardère, while SEPI is a Spanish state holding company. France also owns 0.06% of publicly traded stock.
In October 2005 the British Ministry of Defence warned European politicians to stop, as it sees it, interfering in the corporate governance of EADS. The UK Defence Procurement Minister Lord Drayson has hinted that the UK government, a major customer for EADS, may withhold future contracts. "As a key customer, we see it as important for EADS to move in a direction that is free from political interference."
On 4 April 2006, DaimlerChrysler announced its intention to reduce its shareholding from 30% to 22.5%. The company places a value of the stake at "approximately €2.0 billion."
On 30 August 2006, shortly after the stock price decline caused by the A380 delivery delays, more than 5% of EADS stock has been reportedly purchased by the Russian state-owned Vneshtorgbank. Now its share is nearly 6%. In December 2007, Vneshtorgbank sold EADS shares to another state-controlled bank Vneshekonombank. EADS sharers are to be delivered by Vneshekonombank to the charter capital of JSC "United Aircraft Corporation" in 2008.
On 3 October 2006, shortly after EADS admitted further delays in the Airbus 380 program would cost the company 4.8 billion euros in lost earnings in 2010, EADS shares, traded on the Paris arm of Euronext, were suspended after they surpassed the 10 per cent loss limit. Trading resumed later in the day with the one day loss holding at 7 per cent .
Criticisms
Cluster bomb allegation
In 2005 the Norwegian Government Pension Fund recommended the exclusion of several companies producing clusterbombs or components. EADS and its sister company EADS Finance BV were among them, arguing that EADS manufactures "key components for cluster bombs." The criticsm was centered around TDA, a joint venture between EADS and Thales S.A.. TDA produced the mortar ammunition PR Cargo, which can be considered cluster ammunition, however this definition has since been successfully battled by EADS. EADS and its subsidiaries are now regarded as fulfilling all the conditions of the Ottawa Treaty. According to the new point of view, no product of EADS or its subsidiaries falls into the category of antipersonnel mines as defined by the Ottawa Treaty ("landmines under the Ottawa Treaty"). In April 2006 the fund declared that the basis for excluding EADS from investments related to production of cluster munitions is no longer valid, however its shareholding of MBDA means the fund still excludes EADS due to its indirect involvement in nuclear weapons production.
Bribery
In 2003 Tony Yengeni, former chief whip of South Africa's ANC, was convicted of fraud relating to an arms deal with South Africa, in which EADS were major players, worth around $5bn. The BBC reported that EADS had admitted that it had "rendered assistance" to some 30 senior officials to obtain luxury vehicles, including defence force chief General Siphiwe Nyanda.
Insider trading investigation
On 2 June 2006 co-CEO Noël Forgeard and Airbus CEO Gustav Humbert resigned following the controversy caused by the June 2006 announcement that deliveries of the A380 would be delayed by a further six months. Forgeard was one of a number of executives who exercised stock options in November 2005 and March 2006. He and 21 other executives are under investigation as to whether they knew about the delays in the Airbus A380 project which caused a 26% fall in EADS shares when publicised.
The French government's actions are also under investigation; The stated-owned bank Caisse des Dépots et Consignations (CDC) bought part of Lagardère's 7.5% stake in EADS in April 2006, allowing that latter to partially escape the June 2006 losses.
In June 2008, law firm Coughlin Stoia Geller Rudman and Robbins announced that a class action has been commenced on behalf of an institutional investor in the United States District Court for the Southern District of New York on behalf of U.S. citizens who purchased the publicly traded stock of EADS.
See also
External links
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