Putin Announces Working Group on EADS

09/24/2006

COMPIEGNE, France (AP) - France, Germany and Russia will form a working group to study Moscow’s role in EADS, the company that runs Airbus, Russia’s president said Saturday.

Vladimir Putin sought to ease mounting European concerns about Russia’s growing economic ambitions, including the recent purchase of a 5 percent stake of the French- and German-owned EADS by a Russian state-controlled bank.

“I can give you all assurances that it is not a sign of aggression,” Putin told reporters after a summit northwest of Paris with President Jacques Chirac and German Chancellor Angela Merkel.

Putin said Russia would not use Vneshtorgbank’s share to “change anything in any way” at European Aeronautic Defence and Space Co., and that the bank would not seek to boost its interest in the company without agreement from its French and German partners.


In any case, EADS says any shareholder would be unable to buy its way on the board because of the company’s unusual shareholder pact that requires permission from key owners Lagardere SCA, a French media and defense company, and German automaker DaimlerChrysler AG. (DCX)

Chirac and Merkel did not make any comment about the new working group, or specifically address the Russian stake in EADS.

The working group appeared to be a face-saving move for Russia, one that leaves the door open for more Russian participation in the European company without requiring either side to make decisions yet.

Putin called the Vneshtorgbank purchase “a game of the financial markets,” saying the bank took advantage of EADS’ lower share price due to delays to the superjumbo A380 and a management shake-up.

EADS said earlier this month that it was in high-level discussions on possible new joint investments and aircraft programs with Russian aerospace companies. But EADS also made it clear the investment by Vneshtorgbank would not lead to an increased Russian role within the company itself.

Putin said Vneshtorgbank may hand its share to a new umbrella company for Russia’s aircraft industry, United Aircraft Building Corporation - but only if EADS agrees.

“If we do this, we must agree on the rules of the game,” he said. Otherwise, he insisted Vneshtorgbank would keep its stake as a financial investment.

Vneshtorgbank serves as the international financing arm for Russian industry, and analysts had said its EADS investment is likely to be linked to painful restructuring already under way across Russia’s aeronautical sector - and possibly aimed at securing a bigger share of Airbus work for Russian companies.

Outsourcing more manufacturing to emerging economies could help Airbus in its search for cost cuts to defend its profitability against the weaker U.S. dollar, the currency in which its planes are priced.

Airbus already operates its own engineering facilities in Russia. Russia’s aircraft makers converting nine of the country’s 12 plane assembly plants into component makers.

EADS last year purchased 10 percent of Irkut, one of the makers of Sukhoi fighters.