EADS Considers Downsizing Defence And Space Operation

EADS is set to announce a draconian restructuring plan on Monday that may include thousands of job cuts and strain relations with shareholders Germany and France.

In the line of fire is the company's defence and space operations, both suffering a drop in orders that the company says requires urgent attention.

The restructuring is the brainchild of Tom Enders, the EADS chief executive whose bold plan to merge the European giant with Britain's defence group BAE Systems skidded off the rails last year after a surprise veto by Germany.

But Enders has made it clear that the company cannot continue as is with government clients increasingly resorting to cuts to the military as a sure way to shore up strained finances.

Enders recently told a magazine in Bavaria, that "if defence orders are cancelled or reduced as has happened in Germany in recent years, an impact on production and employment cannot be avoided."

EADS had lost orders worth several billion euros in Germany alone that the company had thought were certain, Enders said.

EADS is considering cutting its total workforce by 20 percent, or 8,000 employees, according to German news agency DPA.

In November, Germany's biggest union IG Metall took industrial action as a warning against the company's plans. In a letter to government, unions in France wondered why a company "with a 650 billion euro order book was not able to maintain job sites."

But the restructuring is seen as unavoidable after the failed plan to merge with BAE. That was shelved after objections from Germany, which worried it would cause considerable layoffs.

Monday's expected restructuring comes at a time when Airbus is responsible for 80 percent of overall sales at EADS.

That historic rise of Airbus came after a radical restructuring in 2007 in a plan that originally called for 10,000 job cuts, but in the end cost 7,900.

EADS has said in recent weeks that no numbers have been decided, but German newspaper Suedeutsche Zeitung reported last week that a defence factory of EADS's Cassidian unit located north of Munich was already slated to be closed.