The longest line at the Farnborough International Airshow this week was for a model aircraft. In the absence of the F-35 Lightning, the colossally expensive and accident-prone stealth fighter that was scheduled to be the show’s highlight before an engine failed on a test aircraft, Lockheed Martin brought a replica.
Mustang Mulally: the Ford CEO, in a 2015 Ford Mustang (Getty Images)
Alan Mulally has a reputation for being decisive, so his declaration that he has “no plans to do anything other than serve Ford” – crushing speculation that he could leave to run Microsoft – should probably be taken at face value.
But Ford’s chief executive has wavered over big jobs before – notably when the carmaker was trying to lure him to Dearborn from Boeing in 2006. Read more
EADS closes Paris: "Someday you'll understand…" ('Casablanca', AP Photo, Files)
If corporate headquarters always have a symbolic as well as an organisational function then EADS’ arrangements symbolised the political complexity of the pan-European aerospace and defence company.
The group’s website lists three “head offices” – in Paris, Munich and Madrid – and one “headquarters”, in Amsterdam. But since an April reorganisation, the group has referred to Toulouse, where chief executive Tom Enders and the important Airbus business are based, as its “single operational headquarters”. That should have been a clue to staff elsewhere that their future might not be so stable. If you’re not operational, you are probably an overhead. So it has proved: EADS is poised to close the Paris office, next to the Bois de Boulogne. Read more
Boeing's Scott Francher outlines the future 777X
The news that Emirates Airline is planning to buy as many as 100 of Boeing’s new fuel-efficient version of the 777 is a further sign of the demand for long-range twin-engined passenger aircraft. Read more
With its sale of composite, fuel-efficient A350 jets to Japan Airlines this week, Airbus entered a market that Boeing has, until now, controlled. It also proved Boeing’s point. The era of the grand aviation project, symbolised by Airbus’s decision more than a decade ago to build the A380 as a superjumbo rival to the Boeing 747, is over.
Ian King and Dick Olver, respectively chief executive and chairman of BAE Systems, are in for a rough ride now the planned deal with EADS has collapsed. When merger plans fall through, the people in the top jobs are always vulnerable. But recent experience suggests Mr King’s future is more secure than Mr Olver’s.
Take a look at a handful of recent abortive transactions – G4S’s takeover of ISS in the support services sector, the tie-up between miners BHP Billiton and Rio Tinto (or, if you prefer, the uncompleted deal between Rio Tinto and Chinalco), the proposed merger of Prudential, the UK insurer, and AIA. The chief executives of all the companies involved are still in position, even though some (Nick Buckles of G4S, I’m talking about you) have suffered further setbacks since their favourite tie-ups unravelled. Read more
The takeover of BAE Systems by EADS to create the biggest European civil and defence aerospace company was always a hard sell to its political and financial shareholders. It is starting to look out of reach.
The latest opponent is Invesco Perpetual, which owns more than 13 per cent of BAE and thinks, to paraphrase, that the company is a deal-junkie that ought to run its business better rather than seeking salvation through M&A. Read more
“National interests in the sphere of strategic-level business have all but disappeared,” claims a senior executive of EADS in a new book. But the opinion of Lutz Bertling, chief executive of the group’s Eurocopter subsidiary, is now being tested in battle, as national governments wrangle over what a merger between EADS and BAE Systems would look like.
To be fair, the German executive’s chapter – “Commercial Top Strategic Leadership: A Helicopter View” – was written before the EADS-BAE talks became public. But the question of how Mr Bertling’s personal views might apply to the aerospace and defence merger was raised at Thursday’s launch of In Business and Battle, a “cross-cultural, cross-sectoral and international” anthology of insights into strategic military and civilian leadership. The discussion at London’s Royal College of Defence Studies – where Mr Bertling first presented his ideas – was non-attributable. But as one of the distinguished guests said: “Consolidation is right, but whether this is the particular merger that should be backed is still open to some debate.” Read more
It is natural to regards any merger proposed by BAE Systems, the UK’s biggest defence company, with suspicion. Had it a better record of predicting its industry’s future and doing deals at the right price, it would be in less of a pickle.
For BAE Systems and EADS, the European aerospace and defence companies whose courtship was revealed last week, it’s simple. Business logic will help level the political hurdles and bridge the legal pitfalls that lie in the path of their proposed union.
Shareholders in BAE Systems and EADS should know what they’re getting into. The FT’s Alison Smith laid out the governance pitfalls on Friday, and Steven Davidoff has pointed out for the New York Times’ Dealbook that setting up a dual-listed structure requires an “unbelievably complex set of agreements in which [the companies] agree to equalise their shares, run their operations collectively and share equally in profits, losses, dividends and any liquidation”.
But a picture is worth a thousand words, so here are three illustrations of the full horror of some dual-listed structures. Expect EADS-BAE, with the added political and defence ingredients, to be 100 times more complex. Nice work for investment bankers, corporate lawyers and company secretaries; hard work for everyone else.
1. This classic describes the consequences of Reuters’ 2008 merger with Thomson Corporation (from the 545-page prospectus that one investor likened to War and Peace). Easy to see why the Anglo-Canadian DLC ended up abandoning its London listing in 2009:
Anyone who reads Sir Howard Davies’s acerbic regular diary column in Management Today magazine will know that the former head of the CBI and London School of Economics is extremely well-qualified to lead an independent inquiry into UK airport capacity. He seems to spend much of his time travelling by air between international destinations – dropping in the occasional barb about the airports he passes through.
In July, he pointed out that “you need a sense of humour to fly from Venice airport. Congested? It makes Heathrow Terminal 1 look like a county cricket ground on a wet afternoon”. Last December, he recounted a bad Paris-Munich TGV experience, but added he was “instinctively pro-train, except when it is owned by Richard Branson”. Read more
The euphoria at Nasa over the successful landing of Curiosity on Mars is infectious. The public seems to have joined the scientists’ celebrations with a fervour similar to that shown by the British for their Olympic team’s successes. As one wag posted on Twitter: “Gold medal for Nasa in the 563 billion metres.”
Be careful, though, in extrapolating from either the Mars mission or the Olympic triumphs the easy conclusion that “aiming high” gets results. As I’ve written, the achievement of even quite small steps can have measurably positive effects on a team’s performance and morale. Similarly, missing the big goal might prove a crushing blow – I watch some of those heart-rending interviews with athletes that fell short of their and their countries’ expectations at the Olympics and wonder how they will start to recover. Read more
I’m never sure whether to be reassured or not that the biggest reason for aircraft to crash is through pilot error, rather than mechanical failure or terrorism. In the case of the Air France Airbus 330 crash in July 2009, in which 228 people perished, pilot error is the culprit once again.
The statistics show that many of the things that typically worry passengers — turbulence, engine failure, the possibility of hijacking etc — are much less dangerous than the simple risk of someone in the cockpit making a mistake. Read more
When a Rolls-Royce engine on a Qantas jet blew up last November, the engine-maker and the airline joined Toyota and BP in a list of companies fighting to repair damage to their global reputations.
But the Rolls-Qantas incident was of a different order and degree from the Toyota car recall and the BP Deepwater Horizon explosion. The settlement announced on Wednesday seems to reflect that. Read more