EADS is Realizing that Bigger is not Better and is Discussing Some Radical Moves - Page 2
EADS is also facing a changing market. It is clear that the U.S. and European defense budgets will not be growing as fast as they have these last ten years. Price is also becoming a major concern for the Pentagon and major defense contractors in the United States are reacting by reducing their overhead and workforce. EADS will have to follow suit if it wants to remain competitive. A major way to reduce the price of a contract proposal is to remove overhead. Eliminating a portion of their current corporate structure would be part of that. So far EADS has not announced similar moves with its workforce as General Dynamics (GD), Boeing (BA) and Lockheed Martin (LMT) have.
EADS has had to confront the issues of being a major commercial aircraft manufacturer as well as a defense contractor several times in the past. Like Boeing it has been able to balance off poor commercial performance with defense work but right now the major market is for commercial airliners as Boeing introduces the 787 and EADS their proposed A320 update and eventual replacement. The obvious decline in defense spending also means that defense work will become more competitive, especially in the U.S., and new contracts will be harder to find. The discussion of major changes with EADS structure shows that the company is planning some perhaps radical moves in reaction to the current economic situation. These potential moves ultimately may prove the right ones in the long term.
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