Memo to Airbus: Don't Make the Same Mistakes as GM and Delphi

When a company faces top line stagnation or revenue concerns, cutting costs typically becomes the best management strategy to stay out of Chapter 11 or general restructuring. But in some cases, when you have a half dozen governments to turn to for corporate welfare, you can hold off on the cost cutting until the corporate guillotine really is just around the corner, which explains the gravity of Airbus' most recent cost cutting news in the Wall Street Journal yesterday (registration required).

In most cases, companies would engage in such activity earlier in a downslide, but Airbus waited as long as possible, owing to the billions in handouts it has received from European governments over the years, propping up its socialist wings the same way the US props up the Iraqi and Afghani governments. Unlike Boeing, who saw that it would need to revolutionize its approach to Spend Management by redefining its supply relationships in their entirety to stay competitive -- and nearly getting rid of the "make" option entirely -- Airbus waited until the last possible second to realize that basic e-sourcing and e-procurement alone would not be enough to save it. It has now realized in the words of its new procurement chief, "The master-slave model has reached the limit of its efficiency."

Because I believe in competition in general, I sincerely hope Airbus can shed its propped-up wings once and for all and deploy a new, sustainable approach to Spend Management to permanently right itself. But in doing so, I sincerely hope that it does not follow in the lines of GM and Visteon, who, among other manufacturers, initially interpreted Spend Management as knocking down their suppliers with a right hook, reviving them with Red Bull, and then hoping they could stay conscious long enough to stay in the ring for the remaining rounds.

Given the tone of the WSJ article, it would appear this is not their intended strategy. For the entire piece reads like Boeing's decade long-old plan for reforming itself through better Spend Management practices. For example, according to the article, Airbus now plans to "tap suppliers to design and product complex elements" in hopes of targeting "airplane design and complex production" issues. It also intends to outsource "low-value" production elements, and "work more closely with suppliers" because of stretched internal "engineering resources". And to hedge commodity costs, it plans to "agree to multiyear contracts with suppliers to promote efficiency".

Hey, when things are tough in the aviation business, who says you need to take a page or two out of Boeing's playbook. It's far easier to simply rip off all of its volumes in their entirety!

Jason Busch

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