Oh my. This could turn into World War III. And perhaps once again, the Americans will have to swoop in and break up the fight.
In a tangle; How having to wire the A380 by hand is hampering Airbus
Financial Times 07/16/2008
Authors: Peggy Hollinger and Gerrit Wiesmann
(c) 2008 The Financial Times Limited. All rights reserved
A decision to bring 2,000 workers from Hamburg to Toulouse has led to strife on the shop floor - and is failing to keep output of the world's biggest passenger jet at a pace likely to satisfy airline customers, writes Peggy Hollinger
Sabine Klauke stands in-side the skeleton of the A380 superjumbo, the world's largest passenger aircraft, and watches her team members take apart the bundle of multi-coloured cables they have just fitted. "The work is not streamlined. We are having to change things again and again," she says.
In the Toulouse assembly plant of Airbus, a German electrician peers through the struts separating the upper and lower decks in search of places to thread the 500km of wiring that will power the mammoth aircraft. A dizzying distance below, on the shop floor, dozens of engineers sit at a makeshift work-station.
As electricians resolve one by one the complex wiring problems that have cost Airbus and EADS, its Franco-German parent, two years of delays and more than €5bn ($8bn, £4bn) in profit, the engineers will adjust the computer blueprints to be used on future aircraft. "Normal installation time is two to three weeks," says Ms Klauke. "This way it is taking us four months."
Airbus, Europe's flagship of manufacturing co-operation, is facing an unprecedented industrial task. Announcing a raft of orders at the Farnborough air show this week, the group's backlog has never been bigger and it is ramping up production to levels it has never before achieved. But at the same time, the group is pushing through a painful restructuring in an attempt to integrate operations that, since Airbus came under the wing of the politically forged EADS in 2000, have enjoyed a degree of national autonomy.
Components factories will be sold, 10,000 jobs cut and the once indisputable right of its four founding countries - France, Germany, Spain and the UK - to share out the production work will no longer take priority over commercial decisions. It is doing all this while trying to rescue the A380 programme, one of the most ambitious in aviation history. The aircraft, which can seat as many as 850 passengers, will set Airbus apart from Boeing, its US rival suffering its own severe delays on the 787 Dreamliner. The gamble has cost the European group more than $20bn (£10bn, €12.5bn) to make happen.
But tempers are flaring on the shop floor over the emergency measures that have been adopted to get the first double-decker jets out of the hangar. Among them is the arrival in Toulouse of 2,000 German electricians to resolve the cabling problems that originated in their own Hamburg factory two years ago. Their presence on the final assembly line - where French workers normally fit together almost-completed parts of the aircraft - has sparked strong tensions in a factory already at capacity with its own 1,500 workers.
Unions say streamlined processes have been replaced by a do-it-yourself system that is stretching the patience of factory workers and threatening the group's ability to meet delivery targets.[/b] "They will first have to succeed at doing the work they should have done in Germany and then prepare to take on the workload themselves from 2009," says one French union boss. "These tensions show fears they may not get there."
In May, Airbus was forced to scale back delivery targets for this year and next, in an acknowledgement that the temporary measures adopted to resolve the cabling problems could not meet that schedule. It was coy about output for 2010 - scheduled at up to four a month - for fear of antagonising customers already publicly critical of the current delays.
Shop-floor frustrations have led to reports of scuffles between French and German workers - an echo of the management rivalries that have plagued the group. It was only a year ago that EADS emerged from the long period of damaging Franco-German power struggles that is blamed for many of today's difficulties.
Those stories have given ammunition to local politicians and others who fear the consequences for France's aerospace industry of the group's restructuring plan. Many inside and outside the group also resent what they see as a growing influence of German managers in a company that was created on the basis of a fine balance among national interests. They too seize on talk of factory floor wars as evidence the French and German camps cannot work together.
Unions, managers and ordinary employees all deny witnessing battles. Yet it is clear that there have been emotional clashes as a result of the high-pressure production process. At various times, French and German teams have complained that their access to the aircraft was deliberately being blocked by the other side. French workers also resent the extra pay their German colleagues receive for being seconded to Toulouse.
Mario Heinen, last week promoted to run the cabin and fuselage cross-border division after two years heading the A380 programme, admits the pressure to keep up with intense production schedules and the overcrowded conditions have not made things easy. "We have been working on these initial aircraft in a handmade way. It is not a perfectly organised industrial process." But there was no choice. "We have delivered five high-quality aircraft this way. If we had left the work in Hamburg, to wait for a new wiring design, we would not have delivered one by now."
Mr Heinen rejects suggestions that the tensions stem from any inability of the French and Germans to work together. "People get nervous when things do not go as they should do. Yes, there are exchanges and yes, there are differences of views. But afterwards we find a solution."
Hannes Mechler and Jean-Pierre Guizerix are on the front line of these exchanges. They lead German and French teams on the second wave of aircraft to be fitted in Toulouse, where some problems have been resolved. They too say that the going has been tough at times. "The industrial process is very ramshackle," says Mr Guizerix. "We are in deep shit." The two men are frank about the fact that cultural differences have aggravated the effects of overcrowding on the assembly line.
Mr Guizerix, with his pink T-shirt and pierced ear, glances over at Mr Mechler's neat button-down shirt and slacks. "We shout a lot. At the beginning the Germans were very surprised by the way we work. It is rugby management," he says. French teams also found German working habits difficult to get used to. "They need everything written down. We just work it out as we go."
Mr Mechler agrees that the French temperament is difficult for Germans to understand. "We don't shout. It is not the German way," he says. But neither is the kissing French colleagues engage in first thing in the morning. "We Germans come into work first thing in the morning a bit like this . . . " He shuffles along with his head bowed and tips a cursory nod to Mr Guizerix.
Mr Guizerix acknowledges, joking aside, that there was frustration on the French side that German teams seemed less efficient. But the reasons were obvious, he says. "The big difference at the beginning was that the French teams knew each other. We knew everyone's strong and weak points, how they worked. The Germans had never worked together. It was a new process and they were far from home. Before teams can work together, they have to know each other. It is no different in any company."
It did not help that at least 60 per cent of the Germans were not even Airbus people but temporary staff drafted in from outside. The strains have led to carping; minor damage has even been inflicted on one or two cars. Action has been taken against offenders and 50 German temps asked to leave. Yet reports of Franco-German clashes still circulate and last week local politicians again lobbied Paris to intervene. Ms Klauke and colleagues fear the impact these rumours could have on teams. "There is no Franco-German tension in my team today," says one German line manager, "but I am worried for the future."
The risk is that trouble in the factory could jeopardise Airbus's recovery programme. "Achieving our targets will be very difficult," says one French union official. "There are too many tensions and too much suspicion."
"Ramping up to full-scale production is a Herculean task," says a German union leader. "When wiring problems emerged, we flew incomplete sections from Hamburg to Toulouse to keep to schedule. Maybe we should have stopped production. Instead we are muddling by. Perhaps we need to start thinking about whether our goals aren't still too ambitious." Both men, senior officials in their unions, declined to have their names published for fear that their comments could further inflame a fraught situation in Toulouse.
It was in April that the tensions and rumours seemed to reach boiling point. Hubert Prévaud, an official of France's CGT union federation who is not afraid to talk, puts the crucial moment down to a half-day strike against the sale of two French factories under the restructuring programme known as Power 8. As roads around the Toulouse factory filled up with 1,500 banner-waving protesters, the rumour went around that French workers were barring entry to German electricians arriving for the early shift. "It simply wasn't true," says Mr Prévaud, who was at the protest. "The French did not block the Germans. They just stopped everyone from going in."
Within days a second rumour had broken out - that German workers in Hamburg had ejected a visiting team of French engineers from the factory. "Lots of people have told me about it," says another senior French union activist who also prefers not to be named. "But I haven't met anyone who has spoken to any of the people involved or even knows who they are."
Some union members accuse middle management of fuelling the reports. Mistrust at executive level has long tarnished the group's efforts at cross-border industrial co-operation. "Basically each side suspects the other of trying to gain the upper hand," says Horst Niehus, head of the works council at the Hamburg factory.
But all acknowledge that there has been a fundamental shift in the balance of power at EADS and Airbus that may be prompting deeper fears. For some it dates back to the management restructuring negotiated a year ago by French President Nicolas Sarkozy and Angela Merkel, the German chancellor. The French government and Lagardère, the media group, together control 22.5 per cent of EADS voting rights while Germany's 22.5 per cent interest is represented by Daimler, the automotive group.
In that deal, Frenchman Louis Gallois took over as sole chief executive at EADS, ending an awkward dual management structure. But German-born Tom Enders won the chief executive's role at Airbus, the main operating subsidiary, while EADS' other plum operating jobs - at Eurocopter and defence - also went to natives from across the Rhine. Those appointments and subsequent changes in certain key positions have sparked anxiety inside the sleek glass-panelled Airbus headquarters outside Toulouse.
Just a few days after the strike a few middle managers, calling themselves the "group of 15", circulated an anonymous memorandum accusing the French government of allowing the Germans the upper hand at EADS and Airbus, to the detriment of France's aerospace industry. They cite a list of grievances including slower implementation of cost-cutting and job losses in Hamburg and Munich and allegations that French suppliers are being awarded a lower proportion of business from Airbus than are German companies.
Airbus executives reject many of the allegations, saying German workers are just as uneasy about the arrival of French managers in areas normally run independently in Germany, such as design and engineering. They acknowledge, however, that Germany has not cut costs as quickly as France. They argue this is due to more complex labour laws and insist that the German factories will catch up rapidly in the coming weeks. Nonetheless, French fears may not be wholly unfounded, according to German government officials. "It could be that the agreement is maybe a bit worse for France than Germany," one admits.
One member of Airbus's European works council, wishing to withhold his name, says a power struggle of national economic interests is being felt inside the company as it attempts to restructure. "It is not Power 8 that has created the inequality - it is the will of the different governments," he says. "Germany protects its interests and has even co-operated with unions [to find German investors and force site sales to domestic companies]. But the French state is less present. It is more prepared to tolerate the loss of aerospace activities than the Germans are."
The CGT's Mr Prévaud says some French workers feel Mr Sarkozy has sold them out to preserve the delicate FrancoGerman political relationship. It is a feeling shared among politicians of the Midi-Pyrenées region where Airbus is based. It is estimated that 84,000 jobs rely directly or indirectly on the aircraft group. Many of these could be at risk as Airbus seeks to reduce its euro-based costs by sourcing more components in dollar-based economies.
Such were the fears that the head of the Toulouse chamber of commerce even wrote to Christine Lagarde, finance minister, accusing the German government of scuppering the creation of a strong French supplier in the region after Airbus postponed the French disposals - as it had done in Germany.
Fabrice Brégier, chief operating officer at Airbus, says such reactions stem from the group's decision a year ago to bury national differences. "We are trying to create one company driven by business factors," he says. "We are changing habits and rules and, when we do that, we destabilise people. It explains why we have this talk of a Franco-German 'war'. We need to align people, not just inside but in the external environment as well."
The problems of the A380 and the uncertainties created by the restructuring have added extra pressure. "How can anyone believe that does not bring up confrontation and resistance to change?" he asks.
Mr Brégier even admits his own past rivalry with Mr Enders may have left its mark. In the aftermath of fierce power battles between the former French and German management sides at EADS, the two men were often seen as rivals for the leadership. "We concluded an alliance because we needed to restructure this company," Mr Brégier says. "We are fully aligned and perhaps some of our top managers don't understand that."
Mr Brégier remains confident that the work being done will result in a stronger Airbus. The German teams will begin to go home early next year and the industrial process will gradually return to normal, he adds. That is not to say the tensions will disappear completely. "These are real aspects of working together in a multicultural environment," Mr Brégier says.
For the trade unions, getting Toulouse back to normal is just the first step. "Our company is still too divided by divergent political interests," says Mr Prévaud. "What was once a symbol of the success of the European Union has in 2008 become a symbol of its failure."
Additional reporting by Gerrit Wiesmann