EADS boss faces grilling over share deals

EADS co-chief executive Noel Forgeard was being questioned on Wednesday by France’s parliamentary finance committee on why he sold millions of euros’ worth of shares in the European aerospace group just before it announced delays in deliveries of its Airbus A380 superjumbo.

The hearing comes amid intense speculation that Forgeard might soon be replaced by Louis Gallois, the head of the French state-run railway SNCF.

Investigators from the French market regulator visited the Paris headquarters of EADS on Tuesday as part of their ongoing probe into share dealing at the European Aeronautic Defence and Space.

Forgeard, who denies any wrongdoing, will be asked to explain to parliamentarians why he and some family members, as well as other EADS executives, sold off stock options in March.

He says that it was only in in April that he heard for the first about production problems that might lead to delays in delivering the new A380, the world’s biggest commercial aircraft and Airbus’ biggest weapon in its fight against arch-rival Boeing.

Those delays became a certainty earlier this month, EADS said, and the news was immediately made public.

That announcement, coupled with a profit warning, sent EADS shares into a tailspin, with the group losing about a quarter of its value — €5,5-billion euros ($6,9-billion) — on June 14.

It also raised serious questions about Airbus’ ability to keep abreast of Boeing in the highly competitive global market for passenger jets.

Since then the French government, which holds a 15% stake in the aerospace group, has come under intense pressure to sort out the crisis, with critics saying that EADS’ Franco-German dual management structure must be streamlined.

Finance Minister Thierry Breton failed on Tuesday to meet the deadline he had set himself to resolve the crisis.

But he told Parliament: “Proposed solutions … are in the process of being finalised,” adding that it was now up to the group’s principal private shareholders to act.

The key private shareholders in EADS are the French media and technology group Lagardere and the German industrial giant DaimlerChrysler.

DaimlerChrysler chief Dieter Zetsche said in an interview on Wednesday that “changes have to happen” at EADS, and the automaker was in “tough discussions” with the aerospace giant’s other main shareholders about how to rapidly resolve the crisis.

But he declined to say if the company, which holds 22,4% of EADS, was demanding changes to EADS’ management.

“We don’t want to build further obstacles to an agreement” with the French shareholders, but “if we are not successful, we might have to go public about where we stand” on the matter, he told the Wall Street Journal Europe.

French Industry Minister Francois Loos said on Tuesday that the division of responsibility between German and French managers at the head of EADS caused complications for the company.

But a spokesperson for German Chancellor Angela Merkel had said on Monday that Berlin saw “no reason” to question the group’s management structure, saying it was prepared to confront the current “challenges”.

Breton told MPs that the shareholder pact at EADS, worked out under the previous Socialist government of the then prime minister Lionel Jospin, “assigns operational decisions to Lagardere and DaimlerChrysler”.

The French government, he said, “can only say yes or no” to proposals that have been made.

One possible change could see EADS eliminating the chief executive position at Airbus and taking over direct control of the aircraft maker, a source close to the matter has said.

Any changes would have to be adopted by the EADS board of directors, which is scheduled to meet on July 13. But the session could be brought forward to approve modifications, sources said.

EADS shares since their crash earlier this month have re-gained some ground, but on Wednday they had again fallen, losing 2,94% to €21,43 on the Paris CAC 40 index. – AFP

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