Louis Gallois, CEO of European Aeronautic Defence and Space Co. NV -- the parent of Airbus -- says the group recently pulled out of a significant
U.S. defense acquisition in order to preserve cash. We're looking into who the target might have been and may have more later on Pipeline. Meanwhile, we'll just point out that the conversation Gallois says he had with his board (as reported by Reuters) is one that's going on in a lot of boardrooms these days.
In a nutshell, it is this: Do you play it safe and hoard cash because you don't know what's ahead? Or do you take advantage of an opportunity to buy low that the recession has created?
And if you already have a deal in the works, should you go through with it?
On that last point, a recent set of
recommendations from the Conference Board is clear. In a January missive on assessing corporate strategy in turbulent times, Mark S. Bergman of Paul, Weiss, Rifkind, Wharton & Garrison LLP writes that boards and execs should:
Review pending transactions and determine whether they are still in the best interest of the company to pursue or whether there is room to renegotiate them on more favorable terms.
At Eads the need to conserve cash won out, Gallois said. For one thing, Airbus may need to help keep some of its suppliers (especially those it shares with the troubled auto industry) afloat. There's also the matter of maybe having to give better financing terms to hard-pressed airline customers.
As Gallois tells it, the abandoned deal was at a very late stage. Quote from the Reuters story: "We were on the way to sending the cheque and we pulled out at the last minute. It was a unanimous position by the board," Gallois said.
Somewhere out there is a very disappointed U.S. defense company, with a board that's now having its own frank conversation. -
Kenneth Klee
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