ARNAUD LAGARDERE ON BOEING/AIRBUS, CHIRAC AND THE

C O N F I D E N T I A L SECTION 01 OF 02 PARIS 001142

SIPDIS

STATE FOR EUR/WE, EUR/ERA, EB/TPP
STATE PASS TO USTR (VERONEAU, NOVELLI, SANFORD)
COMMERCE FOR GRANT ALDONAS AND FRED ELLIOTT

E.O. 12958: DECL: 02/22/2015
TAGS: ETRD EAIR SCUL FR WTRO USTR
SUBJECT: ARNAUD LAGARDERE ON BOEING/AIRBUS, CHIRAC AND THE
MEDIA

REF: A. 04 PARIS 9014 B. PARIS 372

Classified By: Econ Minister-Counselor Thomas J. White for reasons
1.5 (b) and (d).


1. (C) SUMMARY: Ambassador hosted Lagardere group CEO (and
EADS shareholder) Arnaud Lagardere at lunch February 18.
Discussion focused on Lagardere/EADS business plans,
Boeing/Airbus, President Chirac and media industry
developments. Lagardere had unvarnished criticism for
President Chirac. On Airbus, he said that the A350 was a
priority, would be a completely new aircraft (like Boeing,s
787),and would require European launch aid. Nonetheless, he
understands the importance of finding a workable solution to
the Boeing/Airbus dispute. END SUMMARY.


2. (U) The Ambassador hosted Arnaud Lagardere, CEO of the
Lagardere Group, for lunch on February 18. DCM, ECON and FCS
Minister-Counselors also participated. The Lagardere Group
has extensive media holdings in France and around the world,
and owns 15 percent of the European Aeronautic Defense and
Space Company (EADS). EADS in turn owns 80 percent of
Airbus. Lagardere inherited his role from his father, Jean
Luc Lagardere, founder of the group and a driving force
behind the creation of EADS and Airbus.

--------------
LAGARDERE ON CHIRAC
--------------


3. (C) Lagardere had rather scathing criticism for French
President Chirac. Sporting a &Paris 20128 lapel pin
promoting the city,s Summer 2012 Olympic bid, Lagardere said
that Paris is well-placed to win the contest, but differences
between Chirac and Paris, Socialist Mayor have recently
surfaced. Lagardere opined that Chirac messes up everything
he gets involved in. Similarly, Lagardere termed
&ridiculous8 Chirac,s desire to see the launch of a French
language CNN-style news operation. He lamented that a lot of
money will be thrown at this project. &It will be done, but
we will pay.8


4. (C) Regarding the 2007 Presidential elections, Lagardere
) who claims a good relationship with UMP President Nicolas
Sarkozy ) says there is a 100% chance that Sarkozy will run.
Lagardere believes Chirac is also quite likely to run, which
in his view could open up space for Socialist leader Francois
Hollande.

--------------
LAGARDERE,S COMMITMENT TO EADS/AIRBUS
--------------


5. (SBU) There has been frequent speculation that the
Lagardere group, primarily a media conglomerate, may want to
shed its stake in EADS in the next few years. Asked about
the prospect, Lagardere said that he has a 5-8 year horizon
(¬ three years8) for doing so. (Comment. His
subsequent comments suggest this timeline may be designed to
see the A350 project come to fruition. End Comment.) A
Chirac victory in 2007 would hasten his exit, he said, while
a Sarkozy victory would probably mean the later timeline.


6. (C) Lagardere characterized as a &mistake8 the decision
to remove Philippe Camus as French co-head of EADS and to
replace him with current Airbus President Noel Forgeard.
(Comment. Forgeard is a Chirac protege, and Chirac forced
the change. The Lagardere and GOF ownership in EADS is held
in a holding company, each owning half of the 30% stake. The
Camus-Forgeard rivalry is spelled out in ref A. Camus, on
the other hand, has been a long-time Lagardere lieutenant,
and will return to the Lagardere media operation when he
leaves Airbus this summer. End Comment.) Lagardere said
that Camus would take some time this summer to pursue his
U.S. permanent resident status, and assume management of the
Lagardere U.S. interests. Camus, like Lagardere, owns a home
in the U.S., and both plan U.S. university training for their
children. Lagardere joked that he had given Camus &the
virus8 (i.e., a love of the U.S.).


7. (C) There will be tensions within EADS given the styles of
new co-chairs Forgeard and Thomas Enders, according to
Lagardere. He listed three names on the short list for the
new President of Airbus: Eurocopter CEO Fabrice Bregier,
Airbus Executive VP for Operations Gerard Blanc (not well
liked by the Germans, according to Lagardere) and Airbus
Chief Operating Officer Gustav Humbert. Humbert, a German
national, is the dark horse for what will most likely be a
French position at the head of Airbus. Historically, within
Airbus, a French manager always reported to a German
supervisor and vice versa.


8. (C) Lagardere says that Germany was not happy with the
Forgeard/Camus episode and with GOF interest in pushing a
single (French) CEO for EADS. German Chancellor Schroeder,s
call for a possible Russian stake in EADS during the A380
unveiling in Toulouse last month (ref B) was his way of
expressing his displeasure with the French. Lagardere says
his relations with fellow EADS shareholder and
Daimler-Chrysler Chairman Juergen Schremp are quite good, and
Lagardere is considering joining the Daimler-Chrysler board
at Schremp,s invitation.


--------------
AIRBUS READIES THE A350
--------------


9. (SBU) The planned Airbus A350, which will compete with
Boeing,s 787, will be a completely new aircraft. Airbus has
decided not to build it on an A330/340 base, as initially
envisioned. Lagardere said that Airbus is committed to the
project, and cannot allow the 787 to monopolize this market
segment. Airbus will need launch aid to produce the
aircraft, which will not be ready before 2010. He lamented
that 60 percent of Airbus, costs are Euro-denominated, while
100 percent of Airbus sales are in dollars. Lagardere
indicated that an initial launch customer could be announced
in about two months, hinting that it would not be Dubai, but
might be Qatar.


10. (SBU) Lagardere believes that Boeing will only achieve
70-80 percent of its planned sales of the 787, still an
impressive achievement in his view. On the other hand, he
believes Airbus can sell up to 1000 models of its superjumbo
A380. He foresees a turndown in the world aircraft market
looking out to 2008-09. He noted that the Mideast market is
currently booming (the A380 has done well there),but
airlines there are probably overbuying.


11. (C) Lagardere says he has not yet met Boeing CEO Harry
Stonecipher. The Ambassador encouraged him to do so,
pointing out that Stonecipher knew Arnaud,s father, Jean Luc
Lagardere, and had commented to the Ambassador late last year
that he (Stonecipher) and Jean Luc could have resolved the
Boeing/Airbus dispute.

--------------
FRANCE AND CHINA
--------------


12. (C) In an interesting aside, Lagardere called French
President Chirac,s December 2004 visit to China a
&disaster8 for French business. Airbus, Alstom and Alcatel
all came away relatively empty-handed, despite earlier
Chinese hints of major announcements during the visit.
Lagardere noted that the French press was quick to question
whether Chirac had &lost his touch.8

--------------
LAGARDERE MEDIA EXPANSION
--------------


13. (SBU) Eighty percent of the Lagardere Group,s revenue
comes from its media business. The group has diversified
holdings around the world (e.g., 245 magazine titles in 36
countries). Lagardere is considering some additional
acquisitions in the U.S. market and is in discussion with
Henry Kravis, Primedia Inc. for some magazine titles and
with Rupert Murdoch,s media conglomerate.
Leach