Don't miss

Replay


LATEST SHOWS

EYE ON AFRICA

Gambian citizens flee ahead of Barrow inauguration

Read more

MEDIAWATCH

Trump will still tweet from personal Twitter account as President

Read more

FRENCH CONNECTIONS

Population studies: France's 'ethnicity' taboo

Read more

THE DEBATE

Brexit's Biggest Fan: Trump weighs in ahead of Theresa May speech (Part 1)

Read more

THE DEBATE

Brexit's Biggest Fan: Trump weighs in ahead of Theresa May speech (Part 2)

Read more

ENCORE!

Posy Simmonds: 'French women have good handbags, English women have udders'

Read more

FOCUS

Security stepped up in Italy amid terror threat

Read more

ENCORE!

Music producer Uppermost: From the courthouse to the club

Read more

TALKING EUROPE

Bulgarian president-elect hopes for lifting of Russia sanctions

Read more

FOCUS

Our Focus programme brings you exclusive reports from around the world. From Monday to Friday at 7.45 am Paris time.

Latest update : 2009-10-20

The soaring euro spells trouble for the European aerospace sector

The European aerospace industry is facing two problems: high labour costs and the soaring value of the euro. FRANCE 24’s correspondent Chris Bockman reports from the industry’s heartland in Toulouse about the new financial cloud on the horizon.

There is a new financial cloud on the horizon for Europe. The euro is currently trading close to record highs against the US dollar. For European wishing to holiday in the United States it’s great news, but for European manufacturers it makes it extremely difficult to export their goods competitively. Few sectors are feeling the negative impact of this development as severely as aerospace.
 

FRANCE 24’s correspondent Chris Bockman in Toulouse reports, “It is one of the few industries where Europe is still really leading the pack. Our manufacturers build the planes in euros but sell the planes in dollars, so thisis eating into their revenue significantly. In the Toulouse region, 30,000 to 50,000 people work in this industry, which tells you just how much is at stake.

European aerospace giant EADS has two manufacturing subsidiaries, Airbus and ATR, in Toulouse. Both units are feeling the pinch from the soaring euro.
 

The ATR 600 is the latest high tech airplane to take to the skies. The 50 seater plane has a brand new cockpit, is more fuel efficient and cheaper to fly. In other words, it’s a highly attractive option for short haul airline companies.

However, the Franco-Italian manufacturer is caught between two financial storms. Firstly, 10 percent of the orders for its latest offering have already been cancelled due to an inability by its clients to get financing, and secondly, the soaring value of the euro is seriously eating into profits.

To deal with the crisis the airplane manufacturer has no choice but to cut costs by buying parts outside of Europe.

Chief Financial Officer Giovanni Tramparulo told FRANCE 24, “We have a major part of our costs in euros and 100 percent of our revenues are in dollars. We have reacted by increasing our purchasing in US dollar zones or increasing purchasing in low-cost countries, such as Mexico or China.

Airbus is also pushing the panic button. It has warned that every ten cent rise in the euro wipes 1 billion dollars off its profits. Airbus first highlighted this issue when the euro was close to 1 dollar 30 cents. Now, of course, it’s around 1 dollar 50 cents. With most of its workforce in the euro zone – it is now desperately trying to outsource work outside of Europe to cut its running costs. The company has set up its first assembly line in China, and more work is now being transferred to Tunisia.

Airbus has hundreds of suppliers in France. These suppliers are also feeling the squeeze from the high value of the euro. PMV is one such company and it is based half an hour from Airbus, it produces custom made seating for Airbus planes. The work at PMV is highly labour intensive. Airbus is now piling on the pressure for PMV to slash its costs. 

Furthermore, Airbus’s overseas clients who may like the quality of product may still switch to cheaper competitors inside the United States.

PMV's Financial Director Frances Genebes reports that it is not possible to compete with the euro at its current level.

Genebes expanded on this point, saying, “A supplier like us risks losing some of our business to competitors in the United States or the dollar zone. It’s not easy to deal with.  For the time being our customers do not ask us to be paid in dollars but the risk is that this will happen one day, and that will be a real problem for us."

Most suppliers say the biggest problem for them is the uncertainty. With so much volatility in the currency markets it’s extremely difficult for them to plan ahead, yet no one seems to know where the euro is heading from here.

 

By Christopher BOCKMAN

COMMENT(S)

Archives

2017-01-16 Europe

Security stepped up in Italy amid terror threat

Is Italy becoming a jihadist hub? The Berlin Christmas market attacker, Anis Amri, is believed to have been radicalised in prison there. And when a routine police stop led to...

Read more

2017-01-13 Asia-pacific

Is India's digital revolution disconnected from reality?

In November 2016, India's government shocked the country when it announced that a massive 85% of banknotes were no longer legal tender. The move, championed by Prime Minister...

Read more

2017-01-12 Europe

In newly retaken town, Ukrainian troops try to win local support

In eastern Ukraine, the de facto border separating the government-controlled west from the separatist-held east has barely moved in two years of conflict. But that doesn't mean...

Read more

2017-01-11 Americas

'Made In America': US firms move jobs back home

It was one of President-elect Donald Trump's main campaign promises: to bring back manufacturing jobs that American firms have outsourced abroad. Yet several major US companies,...

Read more

2017-01-10 Africa

Sudan's forgotten war: Civilians caught in the crossfire in Nuba Mountains

Over the past five years, human rights groups say hundreds of people have been killed in fighting in the Nuba Mountains in southern Sudan. Rebel groups there have clashed with...

Read more