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Despitebulging order books, the mood at Airbus and Boeing is far from celebratory.Both aviation giants are moaning loudly that their production systems andsupply chains are flawed, albeit for ostensibly different reasons. This weekLouis Gallois, the boss of EADS, the Franco-German aerospace consortium thatowns Airbus, added substance to warnings a week earlier by the planemaker’s chief executive, Tom Enders,that the dollar’s decline was "life-threatening" for the firm. Mr Gallois saidit was no longer just a possibility that Airbus would have to move a large partof its production to "the dollar zone" or low-cost countries, but acertainty.
Airbus isalready in the middle of Power8, a big restructuring plan that involves theloss of 10,000 jobs and the sale of several plants, which is meant to offsetthe losses caused by the delays in delivering the A380 superjumbo. But Power8assumed that a euro was worth $1.35, not today’s $1.47. Mr Gallois estimates thateach 10-cent rise in the euro costs Airbus €1 billion. At present, Airbusmakes 76% of its purchases within Europe, but generates over 60% of its saleselsewhere. It must now shift some production abroad.
Airbus is nowlikely to forge ahead much further. Mr Gallois suggests that when the A350enters service in 2013, 70% of it will have been "purchased" indollars, against 50% for the A380 and an average 24% of Airbus productiontoday. Because Airbus insists that some of its European suppliers price indollars that means about 50% of the A350’s production will be outsourced.New aircraft, such as the A320’s successor, may be made almost entirely outside the euro-zone.
Airbusmaintains that exchange rates are not the only reason for outsourcing: it iskeen to tap into composite-manufacturing expertise wherever it exists. It alsoinsists that it will not repeat the mistakes Boeing has made with its new 787Dreamliner, about 80% of which has been outsourced. A few weeks ago Mike Bair,the executive responsible for the 787 programme, who was recently movedsideways after mounting production delays, launched a withering attack on someof the companies recruited to build the plane. He said that in future Boeingwould not entrust design work to partners who "proved incapable of doingit", and would make suppliers build factories close to Boeing’s main assembly operation, ratherthan flying semi-finished sections of the aircraft round the world on hugeDreamlifter transporters.
It is tooearly to conclude that the two rivals are heading in opposite directions-Boeingrenouncing the global supply chain just as Airbus adopts it. Each company hasits own axe to grind. Airbus needs greater flexibility, and the weak dollarprovides helpful cover as it takes on its grumbling unions. Boeing, for itspart, wants to shift the blame for delays to the 787 on to its partners. Thelogic of global outsourcing in the aerospace industry remains powerful.Whatever they may be saying now, Airbus and Boeing are more likely to convergethan to diverge.
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