October 5, 2006 : Business Week Online

Use of incompatible programs takes the rap, but behind that is a management team cobbled together from formerly separate companies

 

It sounds too simple to be true. Airbus' A380 megajet is now a full two years behind schedule—and the reason, CEO Christian Streiff admitted on Oct. 3, is that design software used at different Airbus factories wasn't compatible.

 

Early this year, when pre-assembled bundles containing hundreds of miles of cabin wiring were delivered from a German factory to the assembly line in France, workers discovered that the bundles, called harnesses, didn't fit properly into the plane. Assembly slowed to a near-standstill, as workers tried to pull the bundles apart and re-thread them through the fuselage. Now Airbus will have to go back to the drawing board and redesign the wiring system.

It's shaping up to be one of the costliest blunders in the history of commercial aerospace. Airbus' parent, European Aeronautic Defense & Space, expects to take a $6.1 billion profit hit over the next four years. Airlines that have ordered the A380 are fuming, and though none so far has canceled an order, Airbus will have to pay millions in late-delivery penalties.

INTEGRATION DISINTEGRATION. How could the global No. 1 aircraft maker have messed up so badly? The answer lies in another major Airbus undertaking that was largely overshadowed by the launch of the world's biggest passenger jet. At the end of 2000, just as Airbus gave the go-ahead to the A380, the company announced it was completing the process of transforming itself into an integrated corporation.

Since its founding in 1970, Airbus had operated as a loose consortium of aerospace companies in France, Germany, Britain, and Spain. Now, the company said, these operations would be knit together into a smooth-running, pan-European business.

In fact, Airbus remained surprisingly balkanized—and the tangled mess inside the A380 is the disastrous result. "The various Airbus locations had their own legacy software, methods, procedures, and Airbus never succeeded in unifying all those efforts," says Hans Weber, CEO of San Diego-based aviation consultant Tecop International, who has close contacts with the company's German operations.

ONE-WAY STREET. Experts familiar with Airbus' design operations tell BusinessWeek.com that the Toulouse assembly plant used the latest version of a sophisticated design software tool called CATIA, made by France's Dassault Systèmes (DASTY), an independent software spinout of French airplane maker Dassault Aviation. But the design center at the Hamburg factory used an earlier version of the CATIA software dating from the 1980s.

As a result, design specs could not flow easily back and forth between the two systems. "The two systems are completely different, they have nothing to do with each other," says Robert Weigl, the Munich-based director of professional services for Proficiency, a Waltham, Mass.-based company that specializes in helping manufacturers integrate different design software.

Why wouldn't Airbus factories all clamor to switch to the latest software? Some local managers apparently balked because of the time and expense involved in retraining engineers to use new design tools. Still, Airbus' top management could have insisted on the changeover…but it didn't.

THEN THERE WERE THREE. One reason may be that Airbus' top management was cobbled together from leaders of the former consortium members. They retained close ties with managers in their own countries and may have been reluctant to force unwanted changes on them. Whatever the reason, Weber says, "It is a massive management failure. There are tremendously dedicated and intelligent people throughout Airbus, and some of them wanted to get [the newest] CATIA embedded, but management just didn't put a high priority on it."

Besides using two versions of Dassault's CATIA on the A380, Airbus also designed much of the plane using software made by a different supplier, Parametric Technology (PMTC) of Needham, Mass. (Parametric says its software is not used for the plane's electrical harnesses, however.)

Indeed, while Dassault Systèmes has been widely regarded for more than a decade as the global leader in aircraft design software, Airbus didn't start buying its software until 2000. Airbus resisted moving to Dassault, some insiders say, out of rivalry with Dassault Aviation, a French maker of fighter planes and executive jets that spun off from the Dassault Systèmes software business.

2D MODELING. Airbus also might have avoided the wiring debacle if its engineers had been using a full digital mockup of the A380, a three-dimensional computer-generated model incorporating all the plane's specifications and subsequent modifications. Rival Boeing (BA) is using such a system for its new 787 Dreamliner. Even Dassault Aviation's latest corporate jet is built from a digital mockup.

Yet Airbus, the global No. 1, only signed its first major contracts for digital-mockup software from Dassault Systèmes within the past year, according to people knowledgeable with the deal.

Can Streiff, Airbus' new CEO, repair the damage? Almost certainly, but it will take time. As with design software, the switch to a digital mockup can't be accomplished overnight. In announcing the latest A380 delays, Airbus said, "The root cause of the problem is that the 3D digital mockup, which facilitates the design of the electrical harnesses' installation, was implemented late and that the people working on it were in their learning curve."

WE HAVE SEEN THE ENEMY. An even tougher challenge for Streiff will be to persuade Airbus' disunited operations to yield to centralized management. Indeed, the infighting could get much worse. German politicians flew into a tizzy after Streiff announced plans to seek more than $6 billion in cost cuts over the next five years.

They're worried that the new Airbus CEO, who is French, will try to save money by slashing jobs in Germany. For more than three decades, Boeing has loomed as Airbus' biggest rival. But now, the biggest threat to Airbus may lie in its own organization.

Europe
OCTOBER 5, 2006
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By Carol Matlack