2009/07/25

Too big to fail (and I'm angry about it)

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The Airbus A400M project is a disaster in my opinion (I favoured the much more promising An-70 from the beginning).

Several air forces concluded a fixed price contract with Airbus to develop a medium military transport aircraft at a fixed price, date and performance (payload/range).

Airbus is over price by billions (€), behind schedule by at least four years and doesn't seem to be able to meet the payload/range requirement. Especially the schedule problems got only worse since they admitted to be in trouble months ago.


A) They promised too much.

B) They kept their best engineers out of the project and withdrew more good ones to fix their troublesome civilian A380 and A350 projects.

C) They don't get an appropriate sanction.

Airbus already missed milestones weeks ago, but got a delay till end of July. Now it's official; our secretaries of defence stick with the project, it will be four years late, be likely be more expensive and no-one seems to expect that the original performance expectations will be met.

By the way; the whole project rests on demands for airlift for political overseas adventures - it's incredibly cost-inefficient for real defence.

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This begs the question; did the consolidation of the Western (and indeed-world-wide) arms industry on the systems integrator level hurt us? Are these companies like EADS (Airbus), MBDA, General Dynamics, BAe Systems, Eurocopter too big to fail?

They certainly looks too big to fail to me. Their projects either don't get canceled even if they suck or they get alternative contracts real quick.

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The A400M case shows another problem as well: Lack of spine.

It was a great opportunity to punish Airbus badly enough to prohibit such failure (overly optimistic promises, low resource priority) in the future.
The tool of fixed cost and performance contracts would have been fearsome to suppliers, but would most likely have been very effective.

It's ruined now. They blinked to save Airbus from multi-billion losses (inflicting the same losses on the taxpayer instead!) in order to save the competitiveness of Airbus with airliners.

In worst case Airbus would have had to attract additional equity capital. The politicians saved the riches of Airbus' current shareholders, not Airbus itself! They did so with taxpayer money!

The damage to the taxpayer is huge; it's in the billions of € for the German taxpayers alone.

About Airbus current shareholders: It's 100% EADS, which again has shareholders, of course. The stock price for EADS shares rose by 1.4% at the day of the news about the A400M renegotiation. Many traders apparently already expected that the politicians would care more about the shareholders than the taxpayers.

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.

I want to see all responsible politicians (and all bureaucrats who advised to do this) sacked. "Lack of spine" is a VERY friendly interpretation of their actions.

Sven Ortmann
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1 comment:

  1. I felt the same about the F-22!
    especially the fact Lockheed Martin kept outright lying about its capabilities!

    ReplyDelete

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