(Corrects year in paragraph 7 to 2007, not 2002)
By Tim Hepher
PARIS Dec 11 Airbus parent EADS was poised on
Wednesday to set out a two-tier strategy stressing growth in
civil jetliners coupled with a forecast of flat defence and
space activities throughout the decade.
The European aerospace group has ditched efforts to balance
civil and defence revenues, which are skewed heavily towards its
Airbus. EADS previously said it plans in 2014 to change its name
to Airbus to reflect growing reliance on the commercial jetliner
EADS gave a taste of the changes in July after the collapse
of merger talks with Britain's BAE Systems in late 2012 prompted
a strategy review. A detailed overview is expected at a two-day
investor meeting starting on Wednesday.
The event comes two days after EADS announced 5,800 job cuts
driven both by cuts in European arms spending and by tough
competition in the satellites market.
"The strategy of EADS is to be number one in commercial
aviation and to be a significant actor in defence and space,
(where) it will remain an investor," Chief Strategy and
Marketing Officer Marwan Lahoud said.
"It is a business model where you have one growth activity
which is commercial aviation and an activity of consolidation -
meaning you manage the return on capital - which is defence and
space," he added.
A previous EADS strategy plan in 2007 called for balance
between Airbus and other revenues in the group, which makes
Ariane space rockets and a share of Eurofighter combat jets.
EADS is expected to give an upbeat assessment on commercial
jet demand that has pushed its shares to record levels in the
past two years and also benefits rival Boeing.
Lahoud predicted jetliners would remain a growth sector
through 2025, but said he did not see a recovery in European
defence spending until at least 2020.
Although stagnant, he said those areas remained a useful
complement to Airbus in a capital intensive industry as a source
of financial returns and technology.
Some investors have called on EADS to de-emphasize or sell
its disparate defence activities because of the prospect of
further declines, caused by reversals of European orders.
But EADS Chief Executive Tom Enders signalled a conscious
decision earlier this year to stay in defence, resulting in the
two-speed strategy to be presented to investors in London.
Analysts say EADS is effectively putting its defence and
space activities on the back burner in the hope that those
markets will recover at some point, while giving investors the
emphasis they are demanding on commercial jetliners.
"Our goal is to concentrate on our strengths and be a leader
in our strong areas," Lahour said.
Many aerospace companies have put defence on care and
maintenance at a time of mandatory budget cuts, focusing on
keeping production lines open and supply chains intact.
At the same time, EADS plans to increase competitiveness in
defence and space businesses through the job cuts, which have
drawn criticism from unions and French and German politicians.
The company's new "EADS 2.0" strategy may have implications
for its activities in the United States as it tones down efforts
to penetrate the world's largest defence market.
Under the "Vision 2020" strategy drawn up at a time of
rising U.S. spending in 2007, EADS had a specific goal to reach
$10 billion in non-Airbus revenues there by next decade.
Lahoud said the new strategy would avoid target dates and
broad statements of purpose and focus instead on taking chances
as they arise, while making the units more profitable.
"We have given up a systematic approach in the United States
and instead have a pragmatic and opportunistic approach."
EADS employs 3,000 people in the United States where its
non-Airbus revenues stand at $1.4 billion a year.
Lahoud said Airbus had set up an "expensive structure" to
compete with Boeing on a $35 billion contest to sell tankers to
the U.S. Air Force, which it eventually lost.
Airbus plans to merge its Cassidian defence business,
Astrium space unit and Airbus Military into one division to be
called Airbus Defence & Space.
Societe Generale said the new division had an implied margin
of 4 percent in 2012, down from 4.9 percent in 2011.
EADS divisions have been set a 10 percent operating margin
goal for 2015, which Lahoud said the company would confirm while
providing more details on the trajectory this week.
EADS is also likely to keep pushing to increase the share of
revenues outside its home countries - Britain, France, Germany
and Spain -- from 30 percent now to at least 40 percent, but
without setting a specific deadline.
(Editing by David Gregorio and Tom Pfeiffer)