Dollar's decline pains Airbus

Airbus may cut its 2 billion euro ($3 billion) research budget to trim costs as the dollar's decline becomes "life-threatening" for the European plane maker, Chief Executive Officer Tom Enders said.

The dollar-euro rate has "passed the pain barrier," Enders told Airbus works-council representatives in Hamburg, Germany, on Thursday. Airbus prices planes in dollars, reducing the value of sales when converted into the European currency. The company also incurs the bulk of expenses in euros, leaving little room to combat the impact of fluctuating rates.

Airbus parent European Aeronautic, Defence & Space (EADS) said Nov. 8 that the dollar's slump required 1 billion euros ($1.48 billion) in annual savings beyond the 2.1 billion euros already planned.

"The dollar has gone down even further since that was announced and the pace of the decline has increased," Airbus spokesman Rainer Ohler said Friday. "This poses a threat to the Airbus business model. We have to consider measures to control spending, and one of our largest budgets is R&D, so it's obviously under consideration."

The dollar has declined 12 percent against the euro so far this year and Friday fell to as low as $1.4966 per euro, the lowest since the European currency's debut in 1999.

"I think it's tough for them to adapt to these changes," said Nick Fothergill, head of industrial sales and trading at Lehman Brothers in London. "In France and Germany there are very strong workers and unions, but now is the opportunity, particularly with this currency differential."

Airbus is cutting 10,000 jobs after it lost 572 million euros last year.

The job cuts are part of a restructuring plan aimed at making the company profitable and competitive. The so-called Power8 program assumes an exchange rate of $1.35 to the euro, Ohler said.

Unions on Friday criticized Enders' remarks. "You can't talk about a life-threatening situation," said Daniel Friedrich, a spokesman for Germany's IG Metall union.

"That is absolute nonsense. We have a flourishing aviation market that gives us new orders all the time. We have capacity utilization for six or seven years."

Friedrich said Airbus needs to review its discounting policy and Enders must be explicit about what measures are planned or risk destabilizing the work force.

"It's not enough to just make headlines," he said. "This is causing uncertainty among the workers. You can't nurse this company back to health with spending cuts. And we can't outsource production to dollar regions. Then you would have to say that plane making in Europe, in Germany, is dead."