Exclusive: Airbus tells A320 suppliers to cut prices 10 percent

Fri Sep 25, 2015 12:46pm EDT
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By Tim Hepher

PARIS (Reuters) - European planemaker Airbus (AIR.PA: Quote) is pressing suppliers on its A320 jet program to slash prices by at least 10 percent by 2019 in order to make the company's main cash cow more competitive, three people familiar with the matter said.

The demand for austerity echoes rival Boeing's (BA.N: Quote) cost-cutting Partner for Success initiative, which has redrawn the relationship between suppliers and the world's biggest planemaker as the industry gears up for record output.

Airbus' cuts are just one part of an internal efficiency program called SCOPe+ that also seeks savings through a close look at procurement and the way planes are developed and sold, according to suppliers and an Airbus document seen by Reuters.

Airbus has told suppliers that the prospect of increased volumes and a longer lifespan for its best-selling jet, which has enjoyed a surge in sales due to an important makeover, means it is time to "review all options" in its supply chain.

This includes a fresh look at the company's procurement strategy that could include extra use of dual sourcing for crucial parts: a strategy designed both to reduce costs and to reduce the risks of shortfalls as production increases.

Airbus is also looking at further shifting its business model to allow airlines less choice over accessories that they previously ordered direct, known as Buyer Furnished Equipment.

Also involved is a longer-term effort to weave manufacturing costs into the design process to prevent unintended overruns in costs on the factory floor, a tool known as "Redesign to Cost."

Though Airbus has confirmed the existence of the SCOPe+ initiative, its details have not been publicly disclosed.   Continued...

People are silhouetted past a logo of the Airbus Group during the Airbus annual news conference in Colomiers, near Toulouse January 13, 2015.  REUTERS/Regis Duvignau