PARIS — EADS, the parent company of Airbus, is bracing for months of thorny negotiations with Berlin as Germany seeks to cancel billions of dollars worth of orders for military aircraft — part of an effort to slash the country’s defense budget by roughly 20 percent.
Thomas de Maizière, the German defense minister, is expected to present the program of radical cuts to the government’s budget committee on Oct. 26. But according to a confidential document that has been leaked to news organizations in recent days, the ministry hopes to sharply reduce its commitments to purchase a range of flying hardware, including A400M transporters, Eurofighter Typhoon fighter jets, as well as NH-90 transport and Tiger attack helicopters.
“This is another sad chapter in the saga of shrinking European budgets — with major industrial and political implications,” said Alexandra Ashbourne, an aerospace and defense industry consultant in London. “This is going to be very difficult for the industry to absorb, on the one hand, while on the other you will see the British, the Spanish and everyone else once again questioning Germany’s commitment to European defense.”
Less than two years after European governments agreed to a complex rescue program for the long-delayed A400M, Germany — the largest customer for the four-engine turboprop plane — now wants to buy 40 instead of 53 of the airlifters, according to a report published Wednesday in the Financial Times. That would bringing Germany’s commitment to the A400M below that of France, which has ordered 50. Germany had originally agreed to buy 60 A400Ms in 2003, but that order was reduced in 2009 as part of an arduously negotiated bailout that saw seven NATO governments agree to a hefty price increase provide an additional €1.5 billion in financing to EADS, whose full name is European Aeronautic Defense Space.
According to German media reports, Berlin also aims to reduce its order for Typhoon fighters to 140 instead of 177, while it aims to take delivery of 80 instead of 122 NH-90 helicopters, and only 40 Tigers — half of an original order for 80.
An EADS spokesman declined to comment before Mr. De Maizière presents his proposals next week, while German Defense Ministry officials did not immediately return calls.
The A400M is built by the military division of Airbus, while the Typhoon is made by a multinational consortium that includes EADS, BAE Systems of Britain and Finmeccanica of Italy. The NH-90 and Tiger are products of EADS’s Eurocopter division.
The procurement cuts are part of a broader German effort to streamline its defense bureaucracy, dramatically reducing the size of its active-duty forces to around 185,000 from 220,000 and abolishing compulsory military service, which ended this year.
But analysts noted that canceling the orders could involve costly penalty payments for Berlin unless it manages to find alternative buyers for the equipment it no longer wants. If those buyers end up outside Europe, they added, that would eat into the company’s future export sales — considered vital to recouping research and development costs.
The A400M, for example, has yet to gain traction outside Europe, with just one foreign customer, Malaysia, with a contract for four planes. South Africa canceled an order for eight planes in 2009, though both sides are still in discussions about possibly reviving that deal at a later date.
EADS has already written down more than €2.4 billion, or $3.3 billion, in cost overruns for the A400M, the first of which are due to be delivered in 2014.
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