European aerospace group EADS must pay compensation for any delays in the delivery of the A400M military airlifter, Germany's Defence Minister said, adding EU partners were discussing the problem together. The comments by Franz Josef Jung in an interview with Reuters signalled a tough stand in an increasingly bitter row between Germany and EADS over delays to Europe's most expensive military project, worth 20 billion euros ($26.94 billion).
Worried about a repeat of costly penalties on its A380 civil superjumbo, Airbus parent EADS wants to soften penalties for delays on the A400M, designed to add urgently needed airlift capacity for seven Nato nations but already 6-12 months late. Jung said Germany had expected the A400M to be delivered by 2010, but after EADS postponed the maiden flight of the transport plane over engine problems, the project was now expected to be delayed by many months, possibly until 2011.
"We have a contract that also includes compensation payments for delays," Jung told Reuters in an interview conducted on Thursday. "If a delivery is delayed, contracts must also be respected in this respect." Jung declined to say how much money Germany could demand. EADS had originally planned the maiden flight for January 2008, then gradually postponed the flight to the end of this year, before postponing it indefinitely in September.
Jung said he hoped the flight would take place next Spring. "I defended a compromise within Nato, for us to have (both) the C17 and the A400M," he said, referring to the C17 Globemaster built by EADS competitor Boeing. "We have done everything for the A400M. It's now up to industry to keep the contracts they made. "(EADS Chief Executive Officer Louis) Gallois wrote me and I wrote back saying contracts have to be respected," Jung said.
France has also asked for penalties but said it is ready to discuss the issue. EADS blames a consortium of engine makers for the delays. Asked whether Nato partners were co-operating over the A400M delays, Jung said: "Yes, the issue is on the agenda. That's also the case at the European Union ... I have said: I'm very willing to help. But I need the planes."
Asked about reports that EADS had threatened to cancel the huge project, Jung said he would not approve of such a decision, adding: "I don't think that's in EADS' interest either." Jung said the global financial crisis had not weighed on Germany's defence projects.
Asked whether Berlin would reduce its order of 180 Eurofighter combat jets, Jung said: "I don't think so.". A tranche of 236 aircraft is set to be delivered to Germany, Britain, Italy and Spain, but London and Rome have said they are considering cancelling or cutting orders.
"There's the problem that some nations are facing compensation situations or don't want to take up the entire range for financial reasons," Jung said. In order to help nations with financing problems, Germany would offer to pass the third tranche in two steps, he said.
The Eurofighter consortium includes Britain's BAE Systems, Airbus parent EADS and Alenia, a unit of Italy's Finmeccanica. The aircraft engines are made by Rolls Royce, MTU Aero Engines and ITP. Some lawmakers in Berlin have estimated the cost of the third tranche to be around 5 billion euros for Germany, bringing the total cost for the 180 Eurofighter jets in the three tranches to around 15 billion euros.
Asked whether the international financial crisis and the German government's rescue plans for the bank sector would have an impact on the defence budget and arms projects, Jung said: "No, the financial crisis doesn't. Unfortunately, there are delays in one or the other project due to reasons different to the financial crisis.!