Last updated: December 9, 2013 7:22 pm

EADS cuts jobs amid reduced defence spend

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A Typhoon Eurofighter: this year, BAE finally secured an order for 72 Eurofighter Typhoon jets for an undisclosed price after years of tortuous negotiation©AFP

EADS is to cut 5,800 jobs at its defence businesses and close sites in Paris, Munich, Spain and Britain as it tries to lift its lagging profit margins and deal with the steep reduction in European defence spending.

The cuts, which represent about 4 per cent of the company’s workforce, are less drastic than unions had feared. They will be made over the coming three years and, critically, they will be voluntary, making it more likely Europe’s largest defence and aerospace company will gain the approval of unions and politicians, which is particularly important in Germany.

For Tom Enders, EADS chief executive, the cuts are a second choice strategy after Berlin blocked his attempt to create the world’s largest defence and aerospace company by taking over BAE Systems, the UK defence company.

EADS is to merge Cassidian, the defence subsidiary, Astrium the space business and Airbus Military, maker of the A400M transport plane, into one group, renamed Airbus Defence and Space.

Defence sales represented €14bn of EADS’ €56.5bn total sales last year but Cassidian’s margins, for example, were just 2.5 per cent, and were even weaker if mature joint ventures such as Eurofighter – a consortium of the EADS, BAE Systems and Finmeccanica of Italy – are taken out of the equation.

In Germany, 2,600 jobs are to go, including 570 temporary positions. In France, where the group’s corporate headquarters in Paris will close, 1,700 jobs will be cut, including 400 temporary positions. Spain will lose 600 jobs, while the UK will lose 700.

The biggest flashpoint with unions is likely to be the company’s plan to close Cassidian’s headquarters in Unterschleissheim, north of Munich, making Ottobrunn, just south of the Bavarian capital, the new main base.

Workers’ representatives in Germany have pledged to fight to preserve the Unterschleissheim headquarters, where more than 1,000 jobs are under threat.

Germany’s Social Democrats have expressed solidarity with workers who demonstrated in protest at the prospect of cuts last month, but Bavaria’s ruling party, the Christian Social Union, allies of Angela Merkel’s Christian Democrats, is likely to acquiesce.

Over the past weeks Mr Enders has sought to shift much of the blame to Ms Merkel, German chancellor, who blocked his attempt to tie up with BAE Systems and has cut several key military procurement programmes.

“In the last years in Germany we have lost considerable order volumes. We’re talking about billions. That ranges from the transporter plane A400M to helicopters to the Euro Hawk. And I don’t even want to speculate here about . . . Eurofighter,” Mr Enders told Germany’s Sueddeutsche Zeitung.

“That cannot and will not be without consequences. What happens to the German sites depends substantially on the order situation in Germany. Export orders help, of course, but don’t change fundamentally this picture,” he added.

The French Socialist government, which has in the past given severe verbal lashings to restructuring industrial groups, is not expected to attempt to block or alter the restructuring, neither are the country’s unions.

Up to 1,500 positions will be available at EADS’s helicopter and civil aerospace divisions for those affected by the cuts, 500 of which will come from administrative roles.

Almost 27 per cent of EADS’s shares are controlled by Germany, France and Spain. The rest are traded on the Dutch stock exchange and have risen almost 70 per cent in the past year. On Monday, however, they were up less than 1 per cent.

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