The European aerospace giant, EADS, might need to become smaller to compete because of a landscape reshaped by the global economic downturn.
The sprawling company is made up of Airbus and sections of the French and German defense industry. Its management is jointly run across several countries and its three main headquarters. While the company has shown strong growth in the defense sector after creating a U.S. subsidiary, its main market remains Europe.
The two governments and their companies, which hold about 45% of the EADS stock, are hoping to make some changes, concerned that they are tying up too much capital in that single company, according to an article in DOD Buzz.
The article offers several suggestions for creating a more streamlined company:
- Split off Airbus into a separate company. Airbus brings in about 80% of the company's current revenues and earnings. With a separate company, Airbus could have its own headquarters helping to reduce overhead and cost. France and Germany could also reduce their stock holdings in Airbus because it would be split off from the larger company.
- Create a separate defense arm with its Cascadian division. This might help the North American subsidiary grow through acquisitions. EADS has failed to acquire U.S. companies because of restrictions on foreign companies. The company has also struggled with receiving dollars from its U.S. customers and having to pay euros to its suppliers. The unfavorable exchange rate has affected its profits, according to DOD Buzz.
- EADS faces a changing landscape where defense spending is scarce both in the United States and Europe. Having a lower overhead would allow the company to offer more competitive prices.
