power struggle?

Knives out at Airbus

Fabrice Bregier, Airbus President and Chief Executive Officer and Tom Enders, Chief Executive Officer of Airbus Group, wait for Indian Prime Minister at the Airbus headquarters in Toulouse
Overtaking on the right? Source: Reuters

The scandal at Airbus over alleged bribery in the sale of civil planes, helicopters and defense equipment has triggered a power struggle. The group’s French number two, Chief Operating Officer Fabrice Brégier, is trying to oust German Chief Executive Tom Enders, Handelsblatt has learned.

Company sources told Handelsblatt that Mr. Brégier is maneuvering against his boss by telling French media that Mr. Enders is the one in a very difficult position. He has alleged that the board of directors has doubts about whether the CEO can go on running the company, given that he was partly responsible for the scandal.

Mr. Brégier by contrast, who has been chief operating officer and president of Airbus Commercial Aircraft only since January 2017, is being portrayed as untainted by any alleged corruption, even though other sources suggested to Handelsblatt that some board members have questions about his role in an earlier job with the company. Instead, Bregier supporters point to Marwan Lahoud, the head of the Airbus Strategy and Marketing Organization (SMO) who left in February 2017, as responsible for all the questionable sales and one of Mr. Enders’ closest colleague. Mr. Enders, the sources said, had countersigned Mr. Lahoud’s decisions.

The question now is whether Mr. Enders can carry on as chief executive and member of the board for 18 more months, company sources said. Mr. Enders’ contract expires in 2019. He has run Airbus since 2012.

"If Enders falls immediately, the board will have no option but to appoint" Mr. Brégier, said one senior Airbus insider.

Mr. Enders, 58, has a very different take on the whole situation. “I can prove that I have always been deeply committed to compliance in this company,” he told Handelsblatt in an interview in early October adding that he had “the full support of the board.” Back in 2007, it was Mr. Enders and Louis Gallois, who was the head of Airbus predecessor EADS at the time, who had pledged to “muck out the stable,” which referred in particular to the marketing organization SMO. The staff of that unit had mainly come from the companies of EADS co-founder Jean-Luc Lagardère, such as Matra Défense and Matra-Aérospatiale.

The corruption scandal, which has led to investigations in France, Britain, Germany and Austria, widened to the US on Tuesday when Airbus said it had uncovered inaccuracies in its filings to US regulators over arms technology sales. These involved inaccurate statements made under a section of the US International Traffic in Arms Regulations (ITAR), which refers to the use of commissions and agents. Airbus said the flaws were first detected in an audit at the end of 2016 and confirmed in an internal review completed in the third quarter.

Airbus is concerned that US authorities, renowned for their tough approach in corporate probes, could now get involved in the investigation which has so far been led by Britain’s Serious Fraud Office (SFO) and the French Parquet National Financier (PNF). In the worst case, the US could impose major fines and temporarily exclude the planemaker from private and public tenders in the American market.

The alleged irregularities involved deals struck as long ago as the 1990s including sales of helicopters to Kazakhstan and passenger planes to China. Large bribes are alleged to have been paid to buyers. Most of the people involved in the transactions came from the Lagardère side of the business and have since left the group.

One man who started his career at Matra/Lagardère, remains in a top job at Airbus: Mr. Brégier. He may feel that he has been indirectly targeted by Mr. Enders who sees the former “Lagardère Boys” as the main culprits in the scandal.

Airbus sources said some on the board had doubts about Mr. Brégier given his possible involvement in the dubious sales, raising questions about whether he would be a suitable successor to Mr. Enders in the event that the German were to leave in 2019. If it becomes clear that Mr. Brégier won’t get the top job, he might prefer to negotiate a golden handshake.

But Mr. Brégier appears to have a different plan. “He’s thinking: If Enders falls immediately, the board will have no option but to appoint him,” said one senior Airbus insider. The Frenchman doesn’t appear to think that the resignation or sacking of Mr. Enders would bring down the entire executive committee, the insider said. That was why he was feeding the French media with information to weaken his boss.

Turkish Airlines in Berlin-Tegel
Taxiing for takeoff? Source: DPA

It’s conspicuous that media reports in France so far have made little mention of Mr. Brégier and instead honed in on Mr. Enders, his supposed “autocratic traits” and his alleged attempts to strengthen the position of German executives at the group.

Yet the investigations by the SFO and PNF will likely result in fines and the departure of managers. That could well include Mr. Brégier, who is only two years younger than Mr. Enders. If the board is serious about a fresh start at the group, it will likely choose a younger generation of executives. “Mr. Brégier has thought for a long time that he’s a shoo-in to succeed Mr. Enders but he may have to accept that it’s not going to happen,” said one Airbus insider.

However, Mr. Brégier has a major ally on the board in the form of Chairman Denis Ranque. Like Mr. Brégier, he’s one of the “X-Mines,” a graduate of both the elite college Polytechnique, whose symbol is the X of crossed cannon barrels, and the equally prestigious Ecole des Mines engineering school. The two men are said to be close friends.

Even though Mr. Enders is German, the simmering boardroom struggle doesn’t seem to be a repeat of the Franco-German disputes that have dogged the multinational corporation in the past. It’s more of an internal French quarrel. According to reports in Paris, the French government is no longer satisfied with Mr. Ranque. And before Mr. Brégier set his sights on Mr. Enders, he was at loggerheads with a French rival in the form of Mr. Lahoud, the strategy chief who left the group in February after the board appointed Mr. Brégier as chief operating operator, which left Mr. Lahoud without a relevant sphere of influence at the company.

In short, Mr. Enders appears to have quite the complex relationship with his COO. Sources at Airbus said Mr. Enders still insists the two have a very good working relationship, citing as an example the recent successful negotiation to buy Bombardier’s C-Series jet in a move that wrong-footed US rival Boeing. Yet the tensions between them are evident. The biggest difference? The German seems more interested in playing them down at a sensitive stage for the company. The Frenchman seems more willing to put them center stage.

Thomas Hanke is Handelsblatt’s France correspondent. To contact the author: hanke@handelsblatt.com

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