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The board of European defence group EADS will discuss additional measures to deal with the weak dollar in the coming weeks, Chief Executive Louis Gallois said on Tuesday. "We are preparing extra measures and we will inform the board in the next few weeks," he told a news conference on the company's 2007 annual results which showed a bigger than expected operating loss.
"We are looking at the possibility of $1.45 to the euro in 2011, 2012 so we have to prepare for that. This is the object of an enhanced Power8 plan and Airbus will be able to present this to the executive committee and then the board in the Spring," he told reporters later.
Gallois said that there were basically two ways to deal with the weak dollar - reducing the break-even point by cutting costs or increasing the dollar content of Airbus products. Hans Peter Ring told the news conference that for 2008, over 95 percent of dollar exposure had been hedged after active hedging reduced the negative impact of the weak dollar in 2007. About half of EADS dollar revenues are hedged by US procurement. On December 31, EADS had $51.3 billion hedged at an average rate of one euro to $1.26 and one pound at $1.71.
For 2008, EADS sees a euro rate of $1.16 in 2008 rising to $1.25 in 2009, $1.33 in 2010, $1.38 in 2011, $1.44 in 2012 and $1.46 in 2013. EADS has large hedges for 2008-2010. European politicians fear EADS and Airbus could move jobs out of Europe in order to boost dollar content. Gallois noted that its US air tanker contract would mainly create jobs in the United States but would also boost the workload at European plants.

Copyright Reuters, 2008

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