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Looking back, there can be no doubt that 2006 was a critical year for EADS.
Events within the Company during the past year have given cause to reflect on the quality of the supervision over its main subsidiary Airbus and to ask critical questions about its management or, more deeply, about its organisational structure. Shareholders have asked critical questions, stakeholders have done so too, as have observers from different areas of society.
The symptoms have become apparent: vital data regarding our key subsidiary Airbus and our critically important A380 programme were not appropriately assessed by Airbus and thus not reported with the necessary accuracy and timeliness, nor was the Company prepared in due time for the competitive challenges.
This failure has hampered the ability of Corporate Management and the Board to steer the Company in the right direction and led to deplorable consequences.Change needed to pave the way for continuity
EADS’ 
corporate governance has been in place since the foundation of the Company in 2000. For many years, EADS exceeded its targets and outperformed its competitors and created jobs and it created value. The Company’s governance supported this, while safeguarding sovereignty issues that are a distinctive feature of our industry – an industry central to our national economies through its positive contributions to technology, exports and of course employment. EADS’ governance successfully fostered the combined interests of the Company’s shareholders and its stakeholders.
Despite these achievements, the Board had to address the root causes of the deficiencies that surfaced in 2006. The Board took wide-ranging decisions to improve the governance model.
Of prime importance were the decisions taken by the Board concerning the management of the Company.
Based on a recommendation from the strategic shareholders, the Board appointed Louis Gallois, a long-standing member of the Board of EADS and an experienced manager also in the field of aerospace, as one of the two Chief Executive Officers. Together with the other Chief Executive Officer Thomas Enders, he is tasked to lead the company into a better future.
No doubt the two CEOs have a lot of challenges ahead of them, and the entire Board is supporting their efforts to succeed in every possible way.
To increase integration and reduce complexity, the Board appointed Louis Gallois to act concurrently as Airbus CEO. To support Mr. Gallois in his dual function, Hans Peter Ring, the EADS Chief Financial Officer, was also appointed CFO of Airbus, and Fabrice Brégier, the former CEO of Eurocopter, was appointed Chief Operating Officer of Airbus.
In parallel, the Board charged a working group composed of experts, including the Chief Technical Officer, and outsiders familiar with our industry, to study the root causes of the A380 delay. These included an extremely challenging timeline for the development, type certification and production ramp-up plans and an insufficient Airbus integration which revealed that the previous system of four national companies and clear accountabilities had not been adequately replaced within an integrated model to ensure the same level of control. Furthermore, there had been a lack of integration with regard to processes and tools (e.g. digital design tools) at different Airbus locations, and the high level of customisation to accommodate customer requirements had resulted in immense complexity and a slow learning curve.
As a consequence, with the full support of EADS’ top management and the entire Board, the Airbus management initiated the Power8 programme to cope with the challenges in the market place, above all the negative impact of the USD-Euro exchange rate development, declining market prices, and the lower costs in other countries along with the high costs at Airbus facilities.
The restructuring became even more pressing as a result of expected losses in income and cash caused by the A380 delay and the urgent need to develop the A350 Family programme.
On top of all of this, a series of measures that add momentum to the integration effort is being cascaded down the entire organisation in EADS and Airbus.
Core shareholders’ commitment
The Board discussed in detail the effects which a reduced dividend might have on the capital market and on the ongoing Power8 programme. Due to the diverging positions, the Board could not come to a common proposal, which leaves the decision on the cash distribution and its amount to the proposal by shareholders from the free float at the Annual General Meeting.
In a move that had been indicated by the core shareholders and therefore long expected by the markets, the EADS industrial co-shareholders sold a part of their equity stakes in 2006 and early 2007. This increased the free float and thus also the weight of EADS in various stock indices.
The core shareholders of EADS demonstrated their commitment to the Company’s long-term perspectives by supporting the launch of the A350XWB programme, which promotes EADS’ long-term market and technology leadership.
We know that EADS is facing tough challenges; the Board has launched strong actions to allow the Group to overcome them. We will strongly support the management to put EADS back on track.
 Manfred Bischoff |
 Arnaud Lagardère |
