Posted by: Carol Matlack on June 23

Airbus’s parent company EADS, reeling from a setback in its fight for a lucrative U.S. Air Force refueling tanker contract, faces hostilities in its own back yard as well. Tensions between Airbus’s French and German operations are running high, with workers in each country complaining they are suffering disproportionately as the company restructures.

French employees are grumbling that 2,000 Germans — brought to Airbus’s Toulouse, France, factory two years ago as “temporary” workers to fix problems on the troubled A380 aircraft program – are still there.

The French also say they are bearing the brunt of the so-called Power 8 restructuring plan to slash $7.5 billion in operating costs by 2010. As of March 31, Airbus’s German operations had achieved only 23% of their cost reduction target, while the French operations had achieved 39%.

The Germans, meanwhile, are unhappy because some work on aircraft cabins, until now done at a factory in Hamburg, has been shifted to Toulouse.

Such bickering only deepens the gloom at Airbus and its parent, the European Aeronautics Defence & Space Co.

Last week the U.S. Government Accountability Office urged the Air Force to reopen bidding on a $35 billion refueling-tanker contract that it had awarded to EADS and its U.S. partner Northrop Grumman. EADS shares have fallen sharply since the GAO announcement on June 18, and they suffered an additional 4.9% drop on June 23. That puts the stock a sickening 77% below its high point in 2006.

“The social climate is not good,” Airbus boss Tom Enders acknowledged in an interview published June 23 in the French business newspaper La Tribune. “It’s impossible to change everything at the same time and at the same speed. To have a total, permanent equilibrium, as some of our unions want, is absolutely unrealistic,” Enders said.

Franco-German friction has never been far below the surface at Airbus. But it’s been heightened by the A380 production debacle, in which wiring assemblies built in Germany didn’t fit properly into fuselages built in France because engineers in the two countries were using different kinds of design software.

Enders told La Tribune that he understood the concerns in Toulouse about the large number of Germans working in the factory. “I asked the same thing when I arrived last year,” he said. “But the sad reality is, the lack of integration in Airbus, caused by an organization of work along national lines as well as different kinds of training and language problems, forced us to bring a large number of Germans” to complete the work that had been started in Germany.

As for moving some aircraft cabin work to Toulouse, Enders said, “It was a decision that went against the traditional division of labor, and it proves that the management is ready to make pragmatic decisions if necessary.”

Another cloud over EADS involves an ongoing probe of alleged insider trading by EADS executives. French prosecutors are investigating at least 17 present and former executives, after France’s stock market regulator questioned their exercise of stock options in the months before the share plummeted on news of the A380 production delays. Prosecutors filed preliminary charges last week against Jean-Paul Gut, the former EADS general manager; former Airbus boss and EADS co-CEO Noël Forgeard was charged earlier.

Enders, who has confirmed that he has been targeted in the probe, told La Tribune that he considered the charges “absurd.” But, he said, “It’s evident that this case is seriously damaging our reputation and that of the company.”