European air and defence company EADS, the parent company of Airbus, said Monday it is cutting 5,800 jobs over the next two years as part of a major overhaul to reduce costs and refocus on civil aviation.
The company said in a statement that the jobs would be eliminated from its corporate and space and defence divisions by the end of 2016. The many space and defence divisions will be combined into one arm, to be called Airbus DS.
EADS, which is changing its overall name to Airbus, is also getting rid of its corporate headquarters, just outside Paris, and moving staff to another site, also outside Paris.
Proposed merger with BAE scuttled
The company had once sought to become less dependent on its civil aircraft business with a goal of increasing its defence business, maker of the A400M European freighter, to around half of total revenue. A major part of that plan was a proposed merger with British defence company BAE Systems. The merger would have created a company with a market value just shy of Airbus rival Boeing's and one with a more equal balance of civil aviation and defence. Currently, the civil aircraft business makes up almost 70 per cent of EADS' group sales.
Objections from the French, German and British government scuttled the merger, and the global economic downturn, which forced governments to drastically cut military spending, has made the defence business a much more difficult one.
Meanwhile, as the emerging world takes to the skies, the civil aircraft business is thriving. Boeing, for instance, forecasts that over the next 20 years the global demand for new airplanes will exceed 35,000 aircraft, valued at $4.8 trillion.
EADS' net earnings rose 45 per cent in the third quarter, to 436 million euros ($637 million Cdn).
Need to expand outside Europe
But CEO Tom Enders said Monday that the cuts were necessary if the company is going to compete and attract defence and space customers in growing markets outside Europe, which is not doing as well.
"We need to cut costs, eliminate product and resource overlaps, create synergies in our operations and product portfolio and better focus our Research and Development efforts," he said.
EADS said it would offer up to 1,500 of those laid off positions at Airbus or Eurocopter. Another 1,300 positions will be eliminated by non-renewal of temporary contracts. After offering voluntary plans to employees, EADS expects to have to make 1,000 to 1,450 outright layoffs.
The company, which has most of its operations in France, Germany, Spain and Britain, did not specify where the cuts would be made.
Unions in France had warned the restructuring would entail layoffs and called on the French government to intervene, saying that the weakening of EADS would have consequences for the entire French economy. French industry has been hit especially hard by the crisis, but was in decline even before the global recession hit. The loss of manufacturing jobs is one reason its unemployment rate is so high, currently at 10.9 per cent.
"The aeronautical, space and defence sector is a major asset for national industry, and we will not accept that it is weakened for reasons of short-term profitability," unions that represent EADS workers wrote in a letter to the prime minister last month.