Airbus to build plant in Tunisia

Paris: European planemaker Airbus will build a components factory in Tunisia as part of an expanded restructuring plan targeting 1 billion euros of extra cuts spread across parent EADS, its top executive said.

The plans will be unveiled to Airbus unions late last night alongside 650 million euros ($918.6 million) of extra savings which are the Toulouse-based planemaker's share of the group total, EADS Chief Executive Louis Gallois told Le Monde.

Also on the agenda for talks between Airbus and its European works council is the progress of factory sales, with the sale of a wings factory in Filton, England, to Britain's GKN set to be wrapped up in days, sources familiar with the matter said.

Dubbed Power8 Plus, the additional 1 billion euros of group cuts come on top of the earlier Power8 restructuring plan which called for 2.1 billion euros of savings between 2007 and 2010, this time solely at Airbus.

EADS said in July it planned to ask all its divisions to shoulder the burden of combating a weak dollar. The group makes military and civilian aircraft and includes helicopter maker Eurocopter and the Astrium space division.

Airbus has been forced to looks again at its restructuring plans after the euro soared above the $1.35 budgeted for in Power8.

EADS is vulnerable to dollar weakness because nearly all its revenue is denominated in dollars, but only half its costs are. A swing of just one cent in the exchange rate means a difference of $100 million in operating income.

EADS said this year it was now basing forecasts on the euro at $1.45. After touching $1.60 in July, it now fetches $1.41.

In another blow to restructuring plans, the sale of five Airbus factories in France and Germany to outside suppliers to help share costs collapsed this year as financing dried up in the global credit crisis.

French supplier Latecoere had planned to add a new factory in Tunisia to operate more leanly if it had succeeded in buying Airbus's Meaulte and Saint Nazaire plants in France.

Gallois told Le Monde that Airbus would go ahead and do this anyway. He sought to reassure unions that there would be no further domestic job cuts on top of 10,000 sought under the Power8 plan, to be shared between Airbus and its suppliers.

Comment: Industry in better shape

Airlines are deferring or cancelling orders, and some have gone bust as the economy weakens, but Gallois said the industry was in a better shape than it had been immediately after the September 11, 2001, attacks, which brought business to a halt.

"There is no reason to panic," he said. Airbus and Boeing have record backlogs after a three-year order boom.

Building a factory in Tunisia would be Airbus's first direct foray outside the euro zone aimed squarely at containing costs.

Moves to start airplane assembly in China from 2009, and assemble freighters in Alabama if it wins a contract to supply tankers based on the same jets to the Pentagon, would save cash but are also driven by strategic attention to lucrative markets. Airbus has been negotiating to sell Filton to GKN for a year, and the two sides have been close to a deal for several weeks.

The British minister responsible for business policy, John Hutton, is due to visit the plant tomorrow, suggesting a final deal could be formally unveiled then.

- Reuters