The Politics of Manufacturing

Who is the true customer of a manufacturing company?  The end user?  Or is it the employees?  The shareholders?  Or the country the company has operations in?  One hint: which group, if it disappeared, would cause the company to immediately fail?  The other groups, although important, become irrelevant at that point.  The natural tendency to find the true customer is one of the advantages of a free and unencumbered market economy.

And when you constrain that free market you end up with a mess that can range from the failed central planning of the old Soviet Union which couldn’t keep even basic foodstuffs in grocery stores… or a company like Airbus that simply can’t figure out how to manufacture.

Last October Bill told you about how a real manufacturing leader at Airbus, Christian Streiff, "resigned" after his plan to manufacture where it made operational sense rather than political sense ruffled too many feathers within the complex multi-national EADS ownership structure that controls the company.  A French bureaucrat, Louis Gallois, replaced him and the games began.

Der Spiegel tells us of the latest political nonsense.

It’s becoming clear that some six years after EADS was founded it’s far from being a European company. Instead it’s a collection of competing national interests with the Spanish, French and Germans locked in a no-holds-barred dust-up.  The French have long sought to take command of the company and are likely to see the restructuring as an opportunity to strengthen their position. The Germans have largely failed to keep pace with the development of new technologies, endangering the future of their factories in the process.  This mixture of national self-interest and jealousies, management mistakes and political quirks make the crisis particularly dangerous.

Obviously they believe the customer is a country, not Singapore Airlines or FedEx.  But in the end both will suffer, as well as their employees.

Workers’ representatives in Germany are already concerned that the French are now hoping to gain control of the company. They’ve calculated that around 50 percent of the 53,000 Airbus employees currently have a French boss. After the restructuring that could jump to 63 percent. The number of workers under a German manager would sink from 31 to 15 percent.

It says a lot about the state of Airbus that such calculations are even being made within a jointly run European company.

Who cares?  Does this create even a smidgeon of value from the perspective of the real customer?  But it will only get worse.  Private investors are bailing.

State politicians from EADS locations in Hamburg, Bremen, Lower Saxony, Baden-Württemberg and Bavaria are alarmed. Together they hope to prevent Germany’s influence on Airbus from dwindling when DaimlerChrysler sells its 7.5 percent stake in EADS, as planned. Private shareholders in EADS, DaimlerChrysler and the French media entrepeneur Arnaud Lagardère, have already decreased their stakes and want to sell even more of their stock.  The politicians want to purchase the stock with several banks.  But EADS management isn’t excited by the prospect of having regional politicians buying into the company.

No kidding.  It’s bad enough that the head of Airbus had never really seen a factory before taking the job.  But now guys whose small-town experience lie with deciding whether sidewalks should be built will have a say in the running of a major airplane "manufacturing" company. 

But political pressure alone will not secure aerospace jobs over the long term. At least not when applied as clumsily as by Germany’s Economy Minister Michael Glos, who recently threatened to deny EADS defense contracts if Airbus made too many cuts at its German facilities. Apparently nobody told the minister that doing so would actually endanger thousands of other jobs in Germany.

What a messy web they weave.  Who’s the customer again?