Haggling delays 3.5 bln euro A400M bailout

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European nations agreed to pump in €3.5 billion ($4.7 billion) to save the delayed Airbus A400M airlifter, but left key details unresolved after more last-minute haggling over loans and jobs.

Technical problems have pushed the troop plane four years behind schedule and €11.2 billion over budget, threatening 10 000 jobs. After savings and writedowns, Airbus parent EADS still faces a hole of €5.2 billion.

The A400M is due to provide airlift capacity to Britain, Belgium, Luxembourg, France, Germany, Spain and Turkey.

Confirmation of the overall size of the rescue package came after EADS accepted a 10% increase in the price of the plane worth a total of €2 billion towards cost overruns.
“The company is no longer making further financial demands,” French Defence Minister Herve Morin said after talks between buyers on the sidelines of European Union defence talks.

Some countries plan to defer deliveries of aircraft as a way of raising the unit price, rather than stumping up new cash.

The plan also includes €1.5 billion of top-up support, billed by officials as guarantees to be repaid from exports.

An upbeat but inconclusive statement released after seven-nation talks on the Mediterranean island of Majorca papered over tensions over the cost to each nation.
“Defence ministers consider that significant progress has been achieved during the negotiations with industry at state secretary (junior minister) level,” the statement said.
“Nations have made an offer to the industry and after having received a letter in response from EADS, it will be evaluated. Defence ministers hope this will help to reach an agreement.”

Delegates said buyers had not yet agreed among themselves on the composition of the €1.5 billion financial support, an issue which may have an impact on the allocation of jobs as well as the size of provisions in the EADS full-year accounts.

The proposed deal leaves EADS with A400M losses of €1.7 billion on top of 2.4 billion written off. But it could be forced to make a provision for 3.2 billion if it has to accept the top-up as a loan rather than an advance on future sales.

Buyers will meet in Paris for a possible signing on March 8 a day before EADS must reveal the size of provisions against A400M losses in its 2009 results.

There have been doubts over whether Britain and Turkey would join the loan deal, while Germany has not taken a decision.

Morin said Spain, which on Wednesday announced an “agreement in principle” to save the A400M, was pushing for any countries that failed to contribute to the €1.5 billion of extra guarantees to renegotiate their share of construction work.

Sticking points

EADS shares, which have moved in step with prospects for a deal, closed down 1.4 % at €14.53, in line with other European blue chips .FTEU3.

Delegates said Germany was holding out on a number of points including sensitive military needs such as terrain-hugging software that EADS wants to delay installing to save costs.

An EADS letter seen by Reuters called for assurances on three fronts that individual nations should not weaken their commitment, buyers should limit requests for optional extras and that they should clarify the €1.5 billion of guarantees.

The plea from EADS Chief Executive Louis Gallois drew a mixed reaction, with some buyers refusing to endorse anything other than a terse acknowledgment. Press releases to trumpet a final deal were shoved back in the drawer.

Speaking in Tokyo earlier, Airbus Chief Executive Tom Enders said he expected an agreement on the rescue package soon.
“I think we’ll get a very significant contribution. We are confident that we can now continue the project,” he said.

German carmaker Daimler, the largest shareholder in EADS, is also anxious for a deal. It hopes to book any indirect charges before March so it can pack the loss into its already dreadful 2009 accounts, sweeping the risks off this year’s balance sheet before they can sully its turnaround plans.

Pic: a400m plane



Source: www.reuters.com