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One Bus, Two Drivers

By Mark Gottlieb, Manufacturing.netThe European Union’s paradigm of diffused power and multi-headed leadership can make for a bumpy ride on the road to industrial growth. Airbus' issues are a prime example; everyone is in charge, so no one is in charge. As a result, problems within Airbus always seem to linger, metastasize and defy effective treatment.

In March of 2000, the heads of government of the European Union’s member states met in Portugal to talk about competitiveness. Recognizing that their continent had fallen far behind North America and Asia in the innovation sweepstakes, leaders of the EU nations decided that something had to be done to catch up with the speeding technological and developmental juggernauts of the United States, Japan and South Korea.
From that meeting came the “Lisbon Agenda,” a policy statement that included an EU-wide target for the year 2010 calling for annual investments in “research and innovation” of at least three percent of EU gross domestic product. The goal, said the European Council, was to refashion the 15-member bloc into “the most competitive economy in the world.”
Today, with 27 member states, the enlarged European Union is still not investing anything near three percent of GDP in research. In fact, after consistently failing to meet their own targets through 2004, EU members decided in 2005 to lower the three-percent bar officially -- in effect, ceding competitive leadership to the economies they had purportedly been chasing since the Lisbon meeting of 2000.
It should have been a bitter moment for all concerned, but newspapers at the time reported neither mass suicides nor even widespread gnashing of teeth. This was, after all, Europe, where the pace of progress has always been measured in ways far different from those in North America and much of Asia.
I happily subscribe to the European outlook on life in general, which is that no one on his deathbed ever said, “Sacré bleu y Gott im Himmel! I wish I had spent more time at work.” But sometimes -- well, sometimes, if you want to achieve anything of substance you just have to get down in the trenches and slog it out the old-fashioned way.
It is, however, decidedly more difficult to get people slogging in the same direction when leadership is diffused and power is spread across innumerable national and continent-wide authorities. In the European Union, no one is in charge because everyone is in charge. Individual national assemblies, the EU parliament, the European Commission, caucuses of member states within the parliament and commission, labor unions, citizens’ groups, even the auto club -- all must have their say on issues large and small.
The European model of consensus and diffused authority produces what is for many citizens a pleasing lifestyle. In the realm of industry, however, a full-bore European approach almost guarantees trouble.
Consider, for example, Airbus.
A mongrel beast, Airbus began life as a consortium of aerospace companies from France, Germany, Spain and Britain. It is now a single entity, a ward of the European Aeronautic Defence and Space Company (EADS), which is also the parent of Eurocopter and of makers of military aircraft and missile systems.
The archetypal European concern, Airbus’s manufacturing capacity is spread over 16 sites among the nations in which its ur-companies reside. Its 1,500-strong supplier network extends into more than 30 countries. It is partially owned by the French government. And in the ultimate bow to European sensibilities, it has what amounts to two chief executives -- Louis Gallois of France, and Gallois’s co-CEO in EADS, Tom Enders of Germany.
Everyone is in charge, so no one is in charge. As a result, problems within Airbus always seem to linger, metastasize and defy effective treatment.
The company’s latest tumor is the A380, a double-decker super-jumbo commercial jet so large it could carry the population of a small town. The A380 has been in development since 1991, and on paper at least it is an impressive achievement in aircraft engineering -- precisely the type of innovative product that would help propel Europe’s competitiveness in the 21st century. So far, though, “on paper” is the only place most people have ever seen one.
A raft of problems affecting the manufacture of the plane pushed back promised delivery dates repeatedly, resulting ultimately in a two-year delay. Understandably, two freight carriers canceled their A380 orders in the interim, turning instead to Airbus’s primary competitor, Boeing. By the end of 2006, the expense of the delays, combined with the rising value of the Euro against the dollar, had pushed Airbus $6.5 billion into the red.
Meanwhile, Airbus was falling even further behind its North American rival in other market sectors. To match Boeing’s upcoming fuel-efficient wide-body 787 Dreamliner, for example, Airbus must now start a design process from scratch, with no expectation of delivering a competitive airworthy craft for at least five years -- barring manufacturing delays, of course.
In February 2007, Airbus announced a brutal restructuring plan intended to save $6.5 billion over three years. Characteristically for a European concern, planned job cuts of 10,000 workers -- some 17 percent of the company’s payroll -- and six plant closures are being parceled out proportionally across national boundaries, in an attempt to balance manufacturing needs with the necessity to mitigate the pain of employment losses in each host country.
The Airbus restructuring plan sparked street demonstrations in Germany and France. For good measure, Airbus workers there and in Spain followed up with a one-day strike in March, supported by workers from some of the manufacturer’s supplier companies in Belgium and the Netherlands.
The latter protest occurred just days before the 50th anniversary of the establishment of the European Union, an irony that highlighted the fundamental conundrum that is endemic to the continent: While the EU lifestyle can be very nice for the average Sean, Jean, Juan or Johan, it is a bit harder to enjoy when European-style management just cost you your job.
In a final painful twist in the tale, not long after the Airbus implosion, the Brussels-based business lobby Eurochambers released the results of a continent-wide study. The organization’s research found that Europe was 22 years behind the U.S. in overall economic growth and 30 years behind in R&D investment.
A different pace of progress, indeed.