EADS management shake-up fails to quell investor concern

A management cull aimed at ending internal feuding at Airbus parent EADS failed to quell investor concerns about its ability to solve aircraft production blunders, and its market valuation suffered a new blow.

Europe's top aerospace group said yesterday the arrival of a new French co-chief executive and a new head of Airbus demonstrated it was getting to grips with operational priorities after a two-week crisis caused by delays to its A380 superjumbo.

But EADS shares fell 0.8 per cent to €22.28 as investors waited for concrete results from a new management team that includes an industrialist without aeronautics experience to run Airbus.

"These replacements will not necessarily calm fears about the delayed A380," said a London-based dealer. The stock also ran into crosswinds from a lower-than-expected valuation of a 20 per cent Airbus stake that EADS is buying back from UK partner BAE Systems. A report by investment bank Rothschild valued BAE's stake at €2.75 billion, sharply below the €4-€5 billion value estimated by some analysts.EADS plans to pay for the stake in cash.

Several analysts expressed concerns about the valuation, which also sent shares in BAE Systems down 3.3 per cent.

"This suggests that there are bigger problems on the A380 than is apparent or the market has been wrong with its Airbus valuation all along. This implies a total EADS enterprise value of €16.75 billion, or €20.90 a share. And BAE was expected to make acquisitions, so this is negative for the whole sector," one London-based dealer said.

A showdown over who was to blame for the A380 delays that stripped a quarter off the EADS share price in June had caused an uproar in France's parliament and threatened a row with Germany. EADS co-chief executive Noel Forgeard quit on Sunday after losing a bitter struggle to keep his post, and the man who had replaced him as Airbus head, Gustav Humbert, also resigned.

EADS appointed railways chief and aeronautics expert Louis Gallois to replace Mr Forgeard and industry outsider Christian Streiff to shore up the industrial processes at Airbus.

German co-chief executive Tom Enders and newly appointed French counterpart Mr Gallois called for an end to in- fighting. They said in a statement that the recent crisis had shown EADS, created from a merger of French, German and Spanish interests in 2000, had to overcome national boundaries, and defended the choice of Mr Streiff as the "best man for the job".

"We'll have to regain the trust of our customers, investors and, not least, our employees," they said. - (Reuters)