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EADS targets two acquisitions in 2008

Latest update : 2008-03-09

The European aerospace group will identify two acquisitions this year in defence, security or services including at least one in the United States, according to an internal memo seen by Reuters news agency.

PARIS, March 9 (Reuters) - EADS wants to identify up to two
acquisitions in the United States this year, according to an
internal memo obtained by Reuters as the European aerospace
group battles opposition in Congress to a U.S. Air Force deal.
 

Chief Executive Louis Gallois told staff that one of the
group's top 10 objectives for 2008 was to "propose 2 acquisition
projects in the field of defence, security or services to the
board, at least one of which is in the United States".
 

The aim is part of a call to action for 2008 distributed
days before EADS is expected to unveil annual losses triggered
by industrial problems in its European plants and a weak dollar.
 

In the memo, Gallois makes delivering on EADS financial
promises and beefing up industrial performance the group's
number one priorities for 2008 as its Airbus civil planemaker
unit reels from costly delays to its A380 superjumbo.
 

Also high on the list is completing the full or partial sale
of half a dozen Airbus factories, opposed by French and German
unions, and ensuring A380 output increases sharply as planned.
 

The goals for 2008 are designed to kickstart a plan called
Vision 2020 which aims to reshape Europe's top aerospace company
as a global player over 12 years. EADS was formed from a merger
of French, German and Spanish interests in 2000.
 

EADS has benefited in its infancy from strong orders for
passenger jets, but believes it is over-dependent on cyclical
airline demand as the economy falters. It wants to increase the
20 percent share of defence in group activities to about half.
 

Executives are also desperate to ease the choking effect on
the group's finances of a weak dollar, saying recently that the
company's survival was at stake -- though part of that rhetoric
was seen as a bid to convince European unions on restructuring.
 

In its biggest breakthrough in defence outside Europe, on
Feb. 29 EADS and partner Northrop Grumman won a $35 billion
order for aerial refuelling tankers dubbed KC-45A.
 

The award triggered an outcry over U.S. jobs and backers in
Congress of defeated Boeing are trying to block the deal.
 

Gallois told staff in the memo that one of the company's
objectives in 2008 would be to "position EADS in the U.S.
defence and security markets, and as a major step, ensure
successful start of the KC-45A tanker programme".
 

Gallois' strategy chief said in January EADS was looking for
a mid-sized aerospace services company worth around $1 billion,
but the memo appeared to be the first time a precise number and
timeframe had been placed on the company's shopping list.
 

Staff are also urged to stabilise the A400M European
heavylifter programme and the naval NH90 helicopter, both facing
delays of up to a year, and secure a third tranche of production
of the multi-national Eurofighter, due to start from 2012.
 

The memo was distributed internally in the past week and its
existence was confirmed by two sources who asked not to be named
because the list has not been released outside the company.
A spokesman for EADS declined to comment.
 

Airbus Chief Executive Tom Enders told Reuters in an
interview on Friday that Alabama, where the KC-45A tankers will
be assembled, would eventually become the "home base" for Airbus
efforts to broaden its industrial footprint outside Europe.
 

Airbus plans to assemble some commercial freighters there.
 
 

NET LOSS FORECAST
 

On Tuesday, EADS is due to report annual results amid
industry forecasts that it will post a loss due to restructuring
charges and the cost of delays to the A380 and A400M programmes.
 

Analysts on average expect EADS to show a net loss of 329
million euros for 2007, according to a Mar. 6 Reuters poll.
 

Most attention will be on business forecasts for 2008 and
the timing and size of any new restructuring measures at Airbus
to reflect the latest plunge in the value of the dollar.
 

The planemaker's Power8 restructuring plan involves factory
sales and 10,000 job cuts, but has been thrown off course by a
rise in the euro to $1.53 from $1.35 when it was drawn up in
late 2006. Every 10 cent swing against the euro makes a
difference of $1 billion in operating profit, according to EADS.
 

Enders told Reuters the latest drop in the U.S. dollar
validated the European planemaker's ambition to shift production
to dollar-zone countries but would not trigger big new layoffs.
 

Industry officials say European leaders are anxious about
progress on the A400M, a 20 billion euro project to provide
domestic heavy lifting capacity for 7 European NATO countries.
 

First flight has been delayed by 6 months to July and a
French official said last month it could slip back to October.
 

The A400M is seen as a key test of Airbus's industrial
credibility in the United States, where it hopes eventually to
sell some of the planes despite the current tankers row. The
market for the planes is dominated by Lockheed Martin's C130.
 

Analysts say Airbus can afford no further slip-ups in output
of the A380, due to rise to 13 planes this year from 1 in 2007.
 

The world's largest airliner went into service last October
after an 18-month delay caused by wiring installation problems.
An insider trading report on the delays is due out this month.

Date created : 2008-03-09

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