Airbus Consortium

Turbulence wrecks Airbus Consortium Airbus Industry is a consortium of European aircraft-manufacturing companies formed in 1970 to meet the demand for short- to medium-range, high-capacity jetliners. Members include the German, French and Spanish-owned European Aeronautic Defense and Space Company EADS (80% stake) and the British owned BAE Systems (20%). Since its inception, Airbus has become a case study for how a multi-lateral consortium can be a disaster in a market-sensitive industry like Aviation.

Technical and cultural issues •Socio-cultural differences: It is well known throughout Europe that Germans prefer consensus and involving others in decision making, while the French like to have a centralized committee making all major decisions. The Spanish are known to be flexible but not very communicative. All these differences have hugely impacted productivity and working efficiency within Airbus. •Governmental interference: It’s hard to enforce economic efficiency where subsidies are involved.

Every time there was a crisis in investment or Opex, the governments of the countries involved jumped in to help out their respective players in the consortium. This led to huge overheads and repeated delays. •Technical oversight: Incompatibility in the versions of CATIA software used by plants in Toulouse, France and Hamburg, Germany resulted in 530 kms of cable wiring throughout the aircraft having to be completely redesigned. This delayed the launch of Airbus A380 for two years, and as much as $6. 1 billion in losses and penalties for late-delivery. A fractured assembly line: Owing to political compulsions, different parts of the aircraft were built at different locations: nose sections in France, fuselages in Germany, wings in UK, tails in Spain, etc, while the final assembly was done in Toulouse (France). All this led to overheads in logistics, not to mention communication gaps, and unforeseen delays. •HR issues: Positions and placements in top management is always a prickly issue, even in well-managed corporate companies owned by a single entity.

The same can become hundred-fold in a joint-venture of this magnitude. To make matters worse, Governments of the countries involved tried to lobby for top positions to their representatives, along with manufacturing contracts to their native countries. A direct consequence of all this was that the launch of Airbus A380 had to be pushed from 2006 to 2008. With several airlines canceling their orders, this resulted in a loss of over 2 billion Euros, a drastic cut in the size of the workforce, closure of a few plants, and a highly damaged brand image.

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Lessons Learned •While workplace diversity is desirable in general, adequate research must be done on both its short-term and long-term impact. •While technical glitches can be easily overcome, cultural differences should be highlighted and pro-active measures undertaken towards cultural integration. •Ability or Proficiency cannot be taken for granted, and Training of employees must be an integral part of any joint venture. •Deadlines must be realistic and all issues known or unknown must be factored, as all of them have an impact on the final delivery.

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