France, Germany strike deal on EADS management

TOULOUSE, France, July 16 (Reuters) France and Germany agreed today to streamline management at European aerospace giant EADS, looking to resolve a long-standing power struggle over the company that has dented bilateral relations.

The deal ends an awkward system of two-headed management, whereby French and German officials shared the chief executive and chairman roles, to try to make the consortium more ''normal''.

EADS, which controls airline maker Airbus, will now have one chairman and one chief executive. But in a sign that national sensitivities remain, the roles are expected to rotate between France and Germany starting in 2011.

''This is a great day for this company, a great decision has been taken. It is a great day for the Franco-German axis,'' said French President Nicolas Sarkozy after talks with German Chancellor Angela Merkel in the southwestern French city of Toulouse.

Their meeting at the headquarters of EADS' biggest earner Airbus coincides with a period of rising friction between Paris and Berlin over economic policy, and officials hope the new-look EADS will help ease at least one source of tension.

However, the two sides remained apart on French calls for new capital to pay for new aircraft, something Berlin fears could lead to a bigger role for the French state.

Sarkozy told a news conference the issue would be tackled again in a few months, but Merkel saw no action for one to two years.

The French government holds a direct 15 percent stake in EADS, while a further 7.5 per cent is owned by French media firm Lagardere. German carmaker DaimlerChrysler owns a matching 22.5 per cent of voting rights.

Until now, French and German interests have shared power in a deal struck when EADS was created in 2000 -- hailed as an engine of industrial co-operation that mirrored the new euro.

Now, its profits are being pummelled by strength in the European currency and industrial delays and its managers often quarrel with tacit political support from Paris and Berlin.

EURO STRENGTH Under Monday's deal, Germany's Thomas Enders will take sole charge of EADS' aeroplane arm Airbus, while Frenchman Louis Gallois will become sole CEO of EADS. They currently serve as co-CEOs, while Gallois also runs Airbus.

''This company will be getting an efficient management structure, a balanced, fair management structure,'' Merkel said.

The shake-up comes a year after delivery delays to Airbus's A380 super jumbo plunged the jet maker into financial crisis and persuaded EADS to shed 10,000 job to claw back savings.

Airbus's difficulties against arch-rival Boeing are also blamed on a weaker dollar -- placing its woes at the centre of a damaging dispute between France and Germany over the euro.

Sarkozy has annoyed Berlin by criticising euro strength and calling for heightened dialogue with the European Central Bank.

Both leaders stressed the importance of an independent ECB today, but Sarkozy maintained his criticism of exchange rate moves, which have seen the euro touch record highs.

The EADS management deal came together in frantic weekend talks, said one source involved in the negotiations.

Talks stumbled over a suggestion that Gallois stay at Airbus, with former paratrooper Enders left as sole CEO of EADS.

Gallois rejected that proposal on the grounds that he would have had to quit the EADS board and report to his former peer, the source said.

In a last-minute compromise Enders, seen as a protege of Merkel, agreed to step downwards and report to Gallois. In return, the French surrendered their prized control of Airbus to gamble instead on the strategic importance of parent EADS.

EADS makes Ariane space rockets, nuclear weapon systems for France and fighters for Germany besides its Airbus jets.

In parallel changes, Daimler's Ruediger Grube will be sole chairman of EADS, but Frenchman Arnaud Lagardere is lined up to return as chairman in a five-year rotation starting from 2011.

The changes will take effect in the fourth quarter.

EADS shares were up 0.3 per cent at 24.06 euros in Paris, bucking a weaker market in late trading. Analysts said investors hoped the perpetual dog fights within Europe's aerospace giant may be over and credit agency Standard and Poor's backed the deal.

Unions said it had failed to address fundamental tensions within Europe's biggest post-war industrial venture. ''There are no new people in this solution, they have just shuffled the pack,'' said Jean-Francois Knepper, of Force Ouvriere union.

REUTERS SR BD2051