Sarkozy and Merkel plot EADS course

French President Nicolas Sarkozy and German Chancellor Angela Merkel will discuss the management structure of aerospace giant EADS at next week’s Franco-German summit (16 July).

Private shareholders have already cooked up plans to streamline the company and the talks, which take place in Toulouse, the home-town of EADS’s daughter company Airbus, are expected to be acrimonious.

Sarkozy has indicated already that he will be aiming to break the jealously guarded power-sharing pact between German and French shareholders that has hitherto hindered decision-making in the group.

Currently, the French government holds 15% of shares, French group Lagardère owns 15% (half of which is up for sale), and carmaker DaimlerChrysler has 22.5%, of which 7.5% is held in association with German investors.

Under the existing arrangements, the chief executive role at EADS is shared by German Thomas Enders and Frenchman Louis Gallois, who also heads the Airbus subsidiary.

The chairmanship of the board of directors is shared between German representative Rüdiger Grube and his French counterpart Arnaud Lagardère.

Sarkozy was believed to have been pushing to streamline decision-making by making Gallois the sole chief executive, with Grube as single chairman of the board.

But French and German shareholders are now said to want Enders for the top job. Gallois would, in this case, retain responsibility for overseeing the controversial Power 8 restructuring programme at Airbus.

"Talks are still under way. No decision has been taken yet. It is true that Sarkozy wants to modify the governance structure of EADS, but shareholders are still debating the issue," said a French diplomat.

Scott Babka, industry analyst with investment bank JP Morgan, said that the market would welcome changes. "Part of the reason why [EADS] stocks are sold at a discount is because of poor corporate governance and its complex management structure. Steps in that direction would unlock value. They’ll ease decision-making and get rid of the fat in the company.

"There’s no point in having a structure that perpetuates the in-house fighting. They have to come up with a change in the board also. At the moment, the board is there to create gridlock."

French President Nicolas Sarkozy and German Chancellor Angela Merkel will discuss the management structure of aerospace giant EADS at next week’s Franco-German summit (16 July).