EADS threatens to freeze airlifter production

Aerospace giant EADS said it may freeze production of its Airbus subsidiary's flagship military airlifter that has become "a heavy loss-maker" for the company, according to a German news report Saturday.


Aerospace giant EADS has threatened to freeze production of its Airbus subsidiary's flagship military airlifter if clients do not drop penalty clauses for late delivery, a German news report said Saturday.

Der Spiegel weekly, trailing its Monday publication, cited a letter sent by Louis Gallois, the French chief executive of both companies, to the governments of seven countries who have ordered the A400M plane.

In the letter, Gallois is quoted as saying the military carrier is "a heavy lossmaker" which is creating "considerable difficulties" at EADS, weighing down on the group's financial performance.

The "anticipated profits" from 180 orders on Airbus's books have already been "invested" with Gallois adding in the letter that the present position could become "untenable" within months unless a deal is agreed that "keeps everyone happy."

EADS wants clients to waive their contractual right to reductions in their bills due to late delivery, but Der Spiegel said Germany's defence ministry would be "standing firm," the magazine saying Berlin is of the view that "financial concessions" should only be discussed upon receipt of the planes.

Business daily Financial Times Deutschland also reported this week that Gallois sent a letter pleading for "understanding" on the A400M.

Last week, Gallois said the plane's first flight would take place "before the end of the year," but the French press reported soon afterwards that costs had risen astronomically and that the first flight was being put back to 2009.

Germany has ordered 60 A400Ms, making it the biggest customer.

Airbus has been struggling with four important delay announcements having been made since 2006 on delivery of its A380 superjumbo civil airliners.

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