A400M bailout talks adjourn with no decision

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Airbus and European nations ended another session of talks on the troubled A400M transport with no decision on whether to bail out Europe’s costliest defence project, which has been plagued by cost overruns that could affect thousands of jobs.

Talks between the planemaker and officials from seven purchasing NATO nations adjourned on Tuesday evening without any result, a German defence ministry spokesman said.

He said talks would be resumed soon. The date and location of what will be the fourth round of talks have not been set, Reuters reports. “The talks took place in a constructive atmosphere,” the German spokesman said, and a spokesman for Airbus parent EADS said it had nothing to add to the government comment.

A source close to the discussions said the talks, held in the midst of a cold snap with Berlin temperatures falling to their lowest in a decade, remained “very difficult.” The source declined to be identified because the discussions between governments and Airbus parent EADS are confidential.

Time is running out before a January 31 deadline to tackle rising costs, and European leaders are expected to intervene. The A400M was designed to carry troops and heavy equipment to promote European military and humanitarian operations.

A total of 180 planes are on order from seven countries — Britain, France, Germany, Spain, Belgium, Luxembourg and Turkey. The 20 billion euro venture has been beset by delays and broken budgets. EADS wants governments to pump in up to 5.2 billion euros to save it.

Germany, the top buyer with 60 planes, has rejected the request. Opposition to the A400M in the nation is growing. Alexander Bonde, a Greens leader in parliament, told Reuters the the Berlin government should pull out of the project. “As far as the A400M is concerned, EADS is like Opel with wings — but without the risk going bankrupt,” Bonde said.

In an effort to find a compromise, Berlin is examining state loan guarantees to Airbus to help it meet cash shortfalls in the programme, a source familiar with the matter said earlier. The source, who asked not to be named, added that all seven European buyers wanted to save the ambitious project. “The goal is the same, but the ways to achieve it can be completely different,” the source told Reuters.

Others close to the talks said any German advances or loans could be paid back from royalties on future exports. The German-backed suggestion opens up the prospect of a patchwork solution to the funding crisis rather than a system of split production tranches proposed by Airbus across the board.

It echoes a system of controversial government loans for Airbus civil projects attacked by the United States, though both sides argue trade rules do not apply to arms procurement.

EADS has so far resisted efforts to place the majority burden for costs on its balance sheet, saying the A400M crisis stems from a mixture of its own errors and political meddling. Airbus has threatened to axe the plane, with a loss of 8000 to 10 000 jobs, in the absence of new support.

A leaked audit report last week highlighted the financial stakes involved in the A400M dispute by telling buyers EADS could need an injection of new funds if the talks collapsed. The warning raised the spectre of a politically sensitive share increase that few are anxious to see at a group prone to instability whenever the fragile power balance between French and German interests comes up for grabs.

French President Nicolas Sarkozy said on Friday he may address the future of the A400M directly with German Chancellor Angela Merkel, whom he is due to meet in Paris on February 4.

EADS shares closed at 14.01 euros, valuing the company at about 11.3 billion euros, which is barely more than the amount of red ink spilled by the A400M. Technical problems have torn an 11.2 billion euro gash in the budget for the project. EADS believes it can recoup 3.6 billion through cost savings and has written off 2.4 billion.

It has asked buyers to contribute the remaining 5.2 billion euros by agreeing to pro-rata cuts in deliveries in a first tranche. Analysts expect a compromise on a lower amount.

Pic: The A400M on a recent flight over Spain