Business Analysis: Franco-German dogfight creates chaos at top of defence giant EADS

Who is going to emerge victorious from the power struggle between the French and Germans for control of EADS, Europe's biggest aerospace and defence company? It is the story that everyone is talking about in the bars and chalets of Le Bourget as this year's Paris Airshow gets into its stride.

Who is going to emerge victorious from the power struggle between the French and Germans for control of EADS, Europe's biggest aerospace and defence company? It is the story that everyone is talking about in the bars and chalets of Le Bourget as this year's Paris Airshow gets into its stride.

Everyone, that is, except EADS itself, which has maintained a Trappist vow of silence on the subject. The company cancelled the lavish pre-show weekend seminar it traditionally holds for journalists at short notice and this year there was no EADS press conference in Paris for the simple reason that it had no chief executive to host either event. Or, in EADS's case, chief executives plural because the company, being a Franco-German joint venture, has had to labour with two of them, plus co-chairmen, since its creation four years ago.

The vacuum at the top of EADS is already beginning to hurt the company, according to insiders. But it also threatens to destabilise Airbus, the civil aircraft manufacturer in which EADS holds an 80 per cent stake and which may too be left rudderless unless it is careful.

Had everything gone according to plan, then Noel Forgeard, the current chief executive of Airbus, and Thomas Enders, the head of EADS's defence division, would now be safely installed as the company's new co-chief executives in place of Philippe Camus and Rainer Hertrich.

The manner in which M. Forgeard was nominated by the French to replace M. Camus - seemingly at the insistence of President Chirac - was a bloody enough affair in its own right. M. Camus described himself as "the victim and target in an abnormal process". But now the Germans scent a French plot to take over EADS entirely. M. Forgeard may sometimes give the appearance of an over-excitable chipmunk, but he is as ambitious as he is talented. He made no secret of his view that EADS needed only one chief executive and that it should be him. For good measure, he also suggested remaining in his role as chief executive of Airbus, which is far and away EADS's most important and profitable business.

The Germans, in the shape of DaimlerChrysler which owns a 31 per cent stake in EADS, not surprisingly refused to play ball, throwing the management succession into chaos. The French then suggested a compromise. The Germans could have their own man as chief executive of Airbus but M. Forgeard would retain executive responsibility not just for the aircraft manufacturer but also for Eurocopter, the other profitable bit of EADS. In addition, the French proposed the creation of a super executive committee to centralise control over EADS further. The Germans still refused to play ball.

The French initially wanted to give the job of running Airbus to its current technical director Gerard Blanc, but this was vetoed by the Germans who instead proposed that it went to Fabrice Bregier, who runs Eurocopter. This was in turn blocked by M. Forgeard, apparently on the grounds that M. Bregier was not an Airbus man. Moreover, despite being French, he was suspected of having gone a little too native at EADS. The latest proposal is that Gustav Humbert, the German chief operating officer of Airbus, takes over as its chief executive.

Unless and until M. Forgeard takes up his new role at EADS, Airbus cannot appoint any successor as chief executive in what is a pivotal period in the company's history. Not only is it embroiled in the biggest ever transatlantic trade dispute with Boeing, but it is preparing to launch a new aircraft programme, the A350, when its A380 super-jumbo is running six months behind schedule. To make matters worse, Boeing (despite also lacking a permanent chief executive) looks likely to take a bigger share of airline orders this year than Airbus for the first time since 1999.

Scant surprise, then, that the shenanigans within EADS should have begun to alarm BAE Systems, which owns the other 20 per cent of Airbus. Mike Turner, BAE's chief executive, says: "When it comes to finding a replacement for a chief executive and you have the French government and a big company like Daimler starting to play a role, then things are not good. We can survive another week or two without a new chief executive but I would not like to see it go beyond that."

M. Forgeard says he is very surprised that Mr Turner should make such a comment. "Do you think Airbus does not have a chief executive? I am in charge of Airbus and dedicating the whole of my working time to Airbus," M. Forgeard insists.

Ordinarily, it would be the job of the company chairman to sort out a mess such as this. But, according to sources in Paris, the French chairman of EADS, Arnauld Lagardere of the Lagardere media group, is under pressure to toe the Chirac line if he wants to scoop the television rights to the 2012 Olympic Games, should they go to the French capital. Meanwhile, his German opposite number, Manfred Bischoff, must take orders from Jurgen Schrempp, the chief executive of DaimlerChrysler.

One insider says: "What is really amazing is that the big institutional shareholders in EADS do not yet seem to have raised their voices. The stand-off is clearly beginning to have an effect on the group. You can see that in the jams which are starting to happen in the decision-making process."