Financial Times:
Talks to save A400M end in deadlock
Talks to save one of Europe's largest defence projects have ended in deadlock, in spite of governments offering to pay EADS €2bn to help cover huge cost overruns on the A400M military transporter.
Several people close to the talks told the Financial Times that Germany, France, the UK and four other European countries had signalled they would be willing to help with extra costs.
The project is more than €5bn (£4.3bn) above the €20bn fixed price EADS subsidiary Airbus agreed to almost seven years ago. The 180-aircraft order for the transport plane, being designed and built by Airbus, is at least four years late. EADS has threatened to abandon the A400M if the seven governments fail to fund a large portion of the cost overrun, as it believes its civil business could struggle with new tasks such as the looming redesign of its A320.
While France, the UK and Spain signalled early on they would be prepared to pay more, or use other methods such as stretching delivery times, Berlin had until now dug its heels in about making changes to the original contract. Officials on both sides said Berlin had softened its line and joined its partners in offering to compensate EADS for €2bn in costs - although it remained open whether this would be through cash payments or by finding ways to reduce production costs.
Other people close to the talks confirmed that the seven governments had tabled a "global offer" but that EADS had rejected it because it was still "billions away" from a figure that would be acceptable to the company. Officials on both sides said EADS also had rejected an offer of state credit guarantees, which would have meant it could borrow to cover cost-overruns. But these people said a credit-guarantee could still be in a deal.
Government officials reported that EADS in effect had raised the amount of money it was looking for by adding a formula to the €5bn cost-overrun to compensate for raw material price rises and some other price increases. "We started the talks looking to bridge a gap of around €5bn," an official briefed about the talks told the FT. "However, we ended the talks aware that EADS was really looking for around €6bn-€7bn."
Government procurement ministers and the heads of EADS and Airbus, Louis Gallois and Tom Enders, spent the end of last week and Tuesday of this week pushing for deal before a self-imposed deadline of January 31. One person close to the negotiations said the talks had ended on "bad terms" and spoke of "a deadlock situation" but all sides were expected to attempt one more meeting before the Franco-German summit late next week.
Officials in Paris and Berlin said the issue was still being dealt with at defence-ministry levels, but that it was now possible Nicolas Sarkozy, French president, and Angela Merkel, German chancellor, would discuss the issue, at least informally.