Fitch downgrades EADS

Fitch Ratings said it downgraded European Aeronautic Defence and Space Co. NV's issuer default and senior unsecured ratings to A- from A and short-term rating to F2 from F1 following news of the resignation of the chief executive officer of Airbus, Christian Streiff. The ratings remain on rating watch negative.

The resignation of the Airbus CEO, only three months after the last overhaul of the senior management structure at EADS and Airbus, follows last week's announcement of a third delay to the company's flagship A380 super jumbo jet program. The announcement also included a €4.8 billion profit warning and a new restructuring drive, dubbed "Power 8," aimed at cutting costs and improving internal efficiencies.

The speedy implementation and effectiveness of the restructuring program was, in Fitch's view, contingent on the new management having sufficient freedom to execute its plan. These latest management changes will cause another distraction to EADS at a time when the company is trying to resolve issues surrounding not only the A380, but also the A350XWB and, potentially, the A400M program. The agency said they also highlight the corporate governance issues, which are inherent weaknesses within the group. In view of these factors, achieving the cost reductions in the previously announced timeframe might prove challenging.

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