EADS (EAD.PA) will take the name of its flagship brand Airbus and target higher profits by combining defense and space units, Europe's top aerospace group confirmed on Wednesday, in a move that could involve job cuts.
Nine months after giving in to political opposition to his attempt to merge with UK arms firm BAE Systems (BAES.L), Chief Executive Tom Enders declared civil jets the main "growth engine" for EADS investors, who pushed shares to new highs.
After unveiling a strong batch of commercial earnings that included a rise in Airbus order targets, Enders did not rule out job cuts in the group's 45,000-strong defense and space operations, which will be based in Germany.
"It (the reorganization) means some real restructuring, but we are forced to do it: the defense business is ... shrinking in Europe," he said.
The company also warned the move could lead to restructuring charges later in the year - a standard sign ahead of layoffs. But it also deferred the politically sensitive decisions until after German elections in September by promising to carry out a more detailed review of the proposals in the second half.
The changes will come into affect starting from January 1, allowing time for what could be lengthy talks with unions.
"To keep the company economically successful, the restructuring must take place in a socially acceptable way," Ruediger Luetjen, head of the company's European works council and a representative of trade union IG Metall, told Reuters.
STANDOFF
The company is already on a potential collision course with the German government over the allocation of jobs for Airbus A350 jets, in a dispute that shows few signs of easing.
People familiar with the matter say Airbus is unwilling to give guarantees over the share of work on the latest jet as long as Germany holds back a development loan. Berlin, for its part, wants guarantees about work on future projects.
"The German government will work closely (with EADS) during the upcoming restructuring process and will place great importance on Germany's interests as an industrial location," Economy Minister Philipp Roesler said.
EADS was formed in 2000 from a merger of French, German and Spanish assets that incorporated passenger jetmaker Airbus, founded three decades earlier and now a global rival to Boeing.
The name EADS - originally European Aeronautic, Defense & Space Co - was never widely recognized and the group has long discussed changing its name to Airbus. But politics have until now made it difficult to tinker with Europe's leading symbols.
Enders hopes the decision to unite under a globally recognized brand will galvanize the rest of the business from space rockets to helicopters and encrypted communications.
Eurocopter, the world's largest commercial helicopter maker, will also be renamed Airbus Helicopters.
UNION TALKS
The decision to co-opt the Airbus brand risks unsettling a delicate balance between EADS and the main Airbus division, where CEO Fabrice Bregier is widely seen as Enders' successor.
Industry sources noted the unit is keeping the one-word name "Airbus" rather than a more subordinate divisional title like its direct counterpart Boeing Commercial Airplanes.
But by uniting defense and space and rallying behind one brand, EADS is adopting much of the look and feel of its rival, where planemaking has traditionally had less independence.
Enders dismissed media "rumors" of internal anxieties and is seen likely to avoid clashing with Bregier. But he ruled out a return to fiefdoms that beset EADS under earlier management.
"Nobody is autonomous on this planet. I have a board and the same goes for division heads in the group," he told reporters.
Powered by commercial demand for Airbus planes, which offset lower helicopter and space earnings, second-quarter EADS operating profit rose 23 percent to 887 million euros on revenue of 13.945 billion, up 3 percent. Airbus makes up two thirds of sales.
Analysts were on average expecting second-quarter operating profit of 839 million euros on revenue of 13.693 billion.
EADS raised the 2013 order target for passenger jets by 25 percent to more than 1,000 aircraft, as reported by Reuters earlier in July [ID:nL6N0FP1U2]. Other targets were unchanged.
Shares in EADS rose 2.2 percent to 45.23 euros by 1038 GMT.
The new order target puts Airbus on course to beat its 2012 gross order tally of 914 jetliners. Industry sources say business in the pipeline suggests it could reach 1,200 orders.
Airbus is battling to regain leadership of the $100 billion annual jet market after Boeing grabbed top spot last year.
Strategy chief Marwan Lahoud said all divisions would join efforts to increase margins to 10 percent by 2015, from a group average of 5.6 percent in the first half of this year.
That would bring EADS roughly in line with Boeing, though the comparison is blurred by accounting differences that allow the U.S. company to spread some costs over a longer period.
Enders said testing for the A350, the newest Airbus jet, was going "very, very well" but the project remained challenging.
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