Airbus parent EADS is seeking clarification on a 3.5 billion euro deal to rescue the A400M airlifter in a bid to head off bigger provisions than it hopes to take in its imminent 2009 earnings.
Talks to fine-tune a European bailout of the troubled project focused on a last-minute spat over the definition of loans or guarantees which governments have put on the table, alongside 2 billion euros of direct aid, to save 10,000 jobs, Reuters reports.
Britain, facing a record debt and elections expected on May 6, is prepared to put 200 million euros into a top-up package of 1.5 billion euros in guarantees but wants this to be treated as a normal loan and paid back, sources close to the talks said. Others, notably France and Germany, are prepared to supply the money as an advance on future royalties from exports.
Analysts say failure to resolve the accounting problem in time for its March 9 results could force EADS to add 1.5 billion euros to its slate of losses on the A400M, on top of 1.7 billion euros that are already expected to trigger new provisions. Britain’s defence ministry declined comment and reiterated Britain wanted the A400M troop plane but not at any price.
The A400M has been hit by heavy losses to be shared between Europe’s largest aerospace group and NATO partners Britain, France, Germany, Spain, Belgium, Luxembourg and Turkey. Defence ministers hope to sign a final deal next Monday.
EADS welcomed a decision to rescue the project but declined to comment on the latest round of technical talks. “EADS welcomes the joint statement by defence ministers of the nations in charge of the A400M and is confident that a positive outcome will be reached with a final agreement that is acceptable to all parties,” an EADS spokesman said on Friday. “However there are still certain clarifications that need to be finalised,” he added, without elaborating.
An EADS letter seen by Reuters called for assurances on three fronts — that individual nations should not weaken their commitment on orders, buyers should limit requests for optional extras and that they should clarify the status of 1.5 billion euros of guarantees that form part of the bailout package. Partners fear the seemingly arcane loan dispute could re-ignite a simmering tensions over scarce high-tech industrial jobs.
Spain, which has invested heavily in composite technology, signalled it would raise the issue of allocation of workshare if other buyers failed to take a full part in the rescue scheme. Britain has long fought to keep wings production in Wales. “Those who pay should get the jobs,” said a delegate from a buyer country at seven-nation talks in Majorca on Thursday.
EADS, on the other hand, has left open the possibility of restructuring if it is forced to take heavy provisions, while also keeping an eye on its credit rating, delegates said. A source familiar with the negotiations said earlier this week that EADS was expected to escape the higher provisions, keeping any new charges below 2 billion euros in 2009 earnings, at the low end of most analysts’ expectations. A second source, who also asked not to be identified, said a compromise labelling the top-up money as future sales instead of loans was being examined to placate Britain, but time was short.
To give its auditors time, EADS would need a deal on the definition well before ministers meet on the eve of its results. Unpicking this from other issues may not be easy, however, as other buyers hold onto their negotiating cards. Germany, for example, has locked horns with EADS over costly A400M extras.
In yet another potential source of tension, several nations plan to take fewer planes as their way of paying for the cost overruns, but EADS is said to be trying to persuade them to freeze rather than cancel unfilled orders. It would otherwise have to amortise long-term development costs over fewer planes.