Airbus Defence and Space has frozen capital spending and urged its 34,000 staff to take "drastic measures" to save cash as it faces the prospect of missing 2017 cash targets by hundreds of millions of euros, according to a memo seen by Reuters.
"With the risk of missing our full-year cash targets by hundreds of millions, we need to do something extraordinary together," divisional finance chief Julian Whitehead told an internal forum, according to a summary distributed to staff.
Airbus has said it expects 2017 group-wide free cashflow to be similar to 2016, before mergers and acquisitions and customer financing. It does not publish cash targets for divisions. Due to the bumpy patterns of cashflows in aerospace, it often faces a dash to meet targets in the fourth quarter.
Airbus Defence & Space, which has warned of continued cash pressures from the troubled A400M military aircraft program, plans to set up a "Cash Crisis" team to improve the situation by end-year, with all its programs expected to participate.
Until those plans become clear, all capital expenditure is being frozen with immediate effect across all the division's activities and across all its subsidiaries, the memo said.
Airbus shares stumbled from record highs and fell as much as 1.6 percent. They were down 1.3 percent by 0945 GMT, making the stock the worst performer on France's benchmark CAC-40 equity index.
Airbus' stock price remains up around 30 percent since the start of 2017 on buoyant demand for passenger jets, although rival Boeing's shares are up 64 percent.
Asked to comment on the memo, an Airbus spokesman said: "We are currently in the traditional year-end race in the commercial and government business."
He added: "It is key to remind our troops at this important time of a business year on the importance of meeting our cash objectives. That's the current ongoing effort at Airbus and it is rather standard procedure to achieve our quarterly and yearly divisional targets at Airbus Defence and Space without deviation."
ALSO FACING PRESSURE FROM A400M DELAYS
Another person close to the group said the language used in the memo was typical of the purely internal battle cry used by managers at this time of year to focus on reaching targets.
On Wednesday, however, Airbus reminded European governments that the delayed A400M would continue to "weigh significantly" on cashflow in 2017 and 2018, especially.
It has been squeezed as Germany withholds some 15 percent in cash owed for the transport plane because of what it regards as systems failing to do what Airbus had promised. The company earlier this year entered talks with buyer nations to try to ease the penalties and get a new agreement on schedules.
At a group level, cash and profits have further been hampered by delays in delivering A320neo jetliners because of delays in receiving engines from U.S. supplier Pratt & Whitney.
Late deliveries delay payments from airlines and prevent workers learning through experience as quickly as planned, which drives up cost and eats up cash for inventory on assembly lines.
Airbus as a whole had 7.9 billion euros of net cash at end-June, down from 11.1 billion at the end of 2016.
While freezing spending, Airbus Defence & Space is also in the midst of a strategy overhaul that has involved selling its electronics activity and now puts faith in the growth of digital services to help it grow faster than the rest of the industry.
Reuters
Thu Oct 05 2017
An Airbus A400M aircraft flies during a display on the first day of the 52nd Paris Air Show at Le Bourget airport near Paris, France on June 19, 2017. - REUTERS
Israel pounds Beirut and Gaza after rockets hit Israel's north
A drone was launched at Prime Minister Benjamin Netanyahu's holiday home.
Elon Musk promises to award $1 mil each day to a signer of his petition
He awarded a $1 million check to an attendee of his event in Pennsylvania aimed at rallying supporters behind Donald Trump.
Former special forces commander Prabowo to take up Indonesian presidency
Indonesia's Prabowo Subianto will take over as president of the world's third-largest democracy after sweeping the country's election with policies like free meals for school children
Zayn Malik postpones US tour dates after One Direction bandmate Liam Payne's death
Payne, 31, died on Wednesday after falling from a third-floor hotel room balcony in Buenos Aires, shocking fans of the boy band.
Why voters in a handful of swing states will decide the US presidential election
The contest will almost certainly be decided by just tens of thousands of voters a tiny fraction of the populace in a handful of states.
INSIGHT - Sudan's war risks 'lost generation' of children
A devastating crisis is unfolding in Sudan, where the most vulnerable members of society children are bearing the brunt of the violence.
Who is Prabowo Subianto, incoming president of Indonesia?
A wealthy ex-general with ties to Indonesia's popular outgoing president and its dictatorial past, looks set to be its next leader.
Trump says he would impose tariffs on China if China went into Taiwan
Republican presidential candidate Donald Trump said he would impose additional tariffs on China if China were to "go into Taiwan,"
Iran's supreme leader says Hamas leader's death will not halt 'Axis of Resistance'
The "Axis of Resistance", built up with years of Iranian support, includes Hamas, the Lebanese Hezbollah group, the Houthi movement in Yemen, and various Shi'ite groups in Iraq and Syria.
Putin says Russia willing to seek compromises between Iran and Israel
Russia is ready to help seek compromises between arch-foes Israel and Iran, President Vladimir Putin said on Friday, saying these would be difficult but possible.
What proposals will Russia push at the BRICS summit?
The proposal is also to establish a BRICS reinsurance company to allow uninterrupted shipment of goods and key commodities between members.
Indonesia's free meals plan in the spotlight as Prabowo readies for office
Prabowo calls the programme one of the main drivers of economic growth, eventually set to add an estimated 2.5 million jobs.
Astro AWANI's revamped English news website, AWANI International, launches on Oct 21
Astro AWANI's revamped English platform delivers in-depth global news and expert analysis to keep you informed on key developments.
Israeli strikes kill 33 people in Jabalia refugee camp in Gaza, medics say
Residents of Jabalia said Israeli tanks had reached the heart of the camp after pushing through suburbs and residential districts.
Liam Payne's ex-partner calls for media restraint after 'painful' death
Cheryl Tweedy used her statement to urge the media to remember they had a seven-year-old son, Bear, who could read the reports.
Analysts: Indonesia's strong MoF leadership team to boost investor confidence
Sri Mulyani Indrawati as head of Indonesia's Ministry of Finance is expected to instil confidence among investors.
Biden offers both a carrot and a stick to Israel as his term nears an end
Israel has frequently resisted US advice and has caused political difficulties for the Biden administration.
Putin says BRICS will generate most of global economic growth
Russian President Vladimir Putin will host a summit of the group in the city of Kazan on Oct. 22-24.
ISIS Malaysia's perspective of Budget 2025
An excellent rakyat-centric budget under the overarching principle of a caring and humane economy.
Budget 2025: Record increase in STR, SARA aid initiatives
The government will provide a significant boost to the Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) initiatives next year.