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Last Updated: Monday, 3 July 2006, 15:52 GMT 16:52 UK
EADS team puts reputation on line
LOUIS GALLOIS
New EADS chief executive Louis Gallois

The new boss of EADS has warned that the company's reputation is "at stake" after the recent problems afflicting its Airbus business.

Louis Gallois, who replaced Noel Forgeard as co-chief executive of the Airbus owner, said rebuilding confidence in the firm was paramount.

Concerns over Airbus's market worth has led shares in EADS and BAE Systems - the other Airbus shareholder - to fall.

Shares in EADS closed down less than 1% but BAE shares were down more than 3%.

BAE Systems wants to sell its 20% stake to EADS but will now get far less for it than was hoped as Airbus' market value has declined.

The stake was independently valued at a lower-than-expected 2.75bn euros (1.9bn), reflecting production problems with the A380 plane.

Stabilization

EADS's new management team said its priority was to restore faith in the A380 after a string of problems led to the departure of Mr Forgeard and Airbus boss Gustav Humbert.

We will have to regain the trust of our customers, investors and - not least - our employees
Louis Gallois, Tom Enders - co-chief executives, EADS

"We need to stabilize the A380 and we need to move ahead with our product strategy, our resources, our processes and the industrial set-up," stressed Mr Gallois and his counterpart Tom Enders.

The two promised further changes in the way Airbus and EADS were managed after fierce criticism of the way the companies have handled the problems affecting the A380.

"Due to the management difficulties of recent weeks and the A380 crisis, EADS' reputation is at stake.

"We will have to regain the trust of our customers, investors and - not least - our employees in the management, strategy and products of EADS."

Falling value

EADS' problems have been exacerbated by a disappointing valuation of Airbus's worth carried out by investment bank NM Rothschild.

BAE had hoped to get twice the amount for its stake before recent disclosures of a seven-month delay to the A380.

It will now advise shareholders whether to accept a sale of the stake at the new valuation price after weighing up its options.

If it goes ahead with the sale - and it remains possible that it will decide to retain the holding - it expects the proceeds to total 1.14bn.

Airbus plant in Filton, near Bristol
Airbus has reassured its British staff about their pensions

Since BAE revealed its intention to sell its stake in April, Airbus has encountered a stream of problems.

Technical difficulties with the A380 - the world's largest commercial aircraft - mean that fewer planes will be ready for delivery in each of the next three years than was originally planned.

The delays are likely to cost Airbus 2bn euros in lost earnings up to 2010, while airlines are likely to seek compensation for late delivery.

One aviation analyst said he expected BAE to proceed with the sale of its stake despite concern over its price.

"BAE has a very strong balance sheet but obviously it is a blow if one to one and a half billion pounds has been knocked off the value of something you were expecting," said Howard Wheeldon.

Dual resignations

Mr Gallois is a former head of French state railway company SNCF, while the new boss of Airbus is Christian Streiff, a former executive of French building materials group Saint-Gobain.

Mr Humbert had been under pressure to resign after being accused of failing to keep shareholders informed about the problems to the A380.

Former EADS co-chief executive Noel Forgeard
Mr Forgeard bowed to pressure to step down

Mr Forgeard was under particular scrutiny after he sold shares in EADS just weeks before the news of the delays first came to light.

He has denied claims of insider trading although market regulators are investigating movement in EADS shares in recent months.

Despite the changes, many experts are worried that EADS is persisting with its dual management structure - made up of two chairmen and chief executives from Germany and France.

EADS' shareholders include the French government and German-US carmaker DaimlerChrysler.




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