Daimler Moves to Cut Stake in EADS Amid Shifting Priorities
Daimler has confirmed plans to reduce its holding in EADS, the parent of Airbus, as the German car group looks to refocus on its core automotive business.
Daimler AG said on Wednesday it intends to reduce its stake in European Aeronautic Defence & Space Company (EADS), the aerospace and defence group behind Airbus. The Stuttgart-based car and truck manufacturer currently holds 22.5 percent of EADS voting rights and 15 percent of its equity. Daimler’s move is aimed at scaling back its involvement in the aerospace sector and concentrating resources on its automotive operations.
EADS, based in the Netherlands, is best known as the parent of Airbus, one of the world’s largest aircraft manufacturers. In 2010, EADS reported a net profit of $732 million, buoyed by a surge in orders for Airbus aircraft. The company’s net cash position stood at nearly $16.8 billion at year end, giving it the financial flexibility to pursue further expansion, particularly in the US market.
Daimler’s changing focus
Daimler’s core business remains cars and commercial vehicles, where it faces intense competition and the ongoing need for investment in new models and technology. The group’s stake in EADS dates back to the formation of the aerospace conglomerate, but Daimler has steadily reduced its involvement in non-automotive businesses since the mid-2000s. The company’s latest statement did not specify the size or timing of the planned stake reduction, but said it hopes to reach a decision soon.
The balance of power at EADS has long been split between French and German interests. On the French side, the government and media group Lagardère jointly hold 22.5 percent. Daimler’s holding on the German side is matched by these French interests, ensuring parity in voting rights. Any reduction by Daimler could shift the balance, unless the German government or another German investor steps in to maintain the status quo.
Implications for EADS and Daimler
A sale of Daimler’s stake would not affect day-to-day operations at EADS or Airbus but could alter the company’s governance structure if another party acquires the shares. For Daimler, the move would free up capital and management attention for its main automotive business, where it is investing in new model launches and technology development. The German government has not confirmed whether it would intervene to keep the stake in German hands, with a spokesman declining to comment on the matter.
EADS’s recent loss to Boeing in the US Air Force tanker competition highlighted the challenges European aerospace firms face in the American defence market, despite strong commercial performance from Airbus. The outcome may have influenced Daimler’s decision to re-evaluate its position in the sector.
What happens next
Daimler has not set a public timetable for reducing its EADS stake. Any decision will depend on negotiations with other shareholders and the German government’s stance on maintaining a Franco-German balance at the top of EADS. Until then, Daimler remains one of the largest industrial shareholders in Europe’s leading aerospace group.
