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Berlin withholds $781 million loan for Airbus A350: sources
October 17, 2012 / 12:05 PM / 5 years ago

Berlin withholds $781 million loan for Airbus A350: sources

FRANKFURT/BERLIN (Reuters) - The German government is withholding part of a loan for the development of the Airbus A350 airliner, two government sources said, as tension simmers between Berlin and the planemaker’s parent EADS EAD.PA over German influence and jobs.

The 600 million-euro ($781.4 million) loan is being held back because Airbus did not stick to an agreement on how much of the work for the aircraft was to be done in Germany, the sources told Reuters on Wednesday, confirming a report in daily newspaper Handelsblatt.

“The loan was promised in the clear expectation that Airbus would strengthen and expand its research, development and production activities at its German sites,” one person said.

Relations between Germany and EADS have been strained this year after Chief Executive Tom Enders indicated he would move some EADS and Airbus operations to Toulouse, France, from Germany.

Berlin’s calls in March for Airbus to locate more of its activities in the country and hire equal numbers of French and German executives prompted EADS to say it would not tolerate political meddling.

German concern over jobs was also one of the factors that contributed to the collapse last week of the proposed merger between EADS and BAE Systems Plc (BAES.L), which would have created the world’s biggest arms and aerospace group.

Another issue was Germany’s desire to ensure it would have the option to increase its stake in the merged company should France do so, alienating the British, who wanted a cap of 10 percent on state shareholdings.

“We have an interest in remaining always on an equal level with our French partners in this company,” Germany’s economy minister Philipp Roesler said on Wednesday, when asked about Berlin’s role in the collapsed talks.

He added that Germany was in talks with EADS on dividing up research and production work between the countries.

“We don’t comment on the contents of our contractual agreements,” a spokesman for Airbus said on Wednesday.

The A350 loan would have been the second tranche of up to 1 billion euros Berlin had promised to EADS for the development of Airbus’s answer to Boeing Co’s (BA.N) 787 Dreamliner in the mid-sized segment of the aircraft market.

EADS was already mulling doing without part of the loan in order to prevent the government from influencing its production locations, another German paper wrote back in March.

Former EADS CEO Louis Gallois had hinted in January that the company could eat into its cash pile of over 11 billion euros rather than tap new loans, which were intended mainly to share out the development risk.

($1 = 0.7679 euros)

Reporting by Andreas Rinke, Sarah Marsh and Gareth Jones in Berlin and Victoria Bryan in Frankfurt; Editing by David Holmes and Helen Massy-Beresford

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