News
TCI demands Safran abandon Zodiac takeover
May 19th 2017
TCI Fund Management again has called for the board of Safran to cancel the planned US$9 billion takeover of Zodiac Aerospace and focus instead on fixing design [supplier] problems with the LEAP-1B engine, the power plant for Boeing’s B737 MAX series. Read More »
Boeing last week suspended MAX test flights after it discovered quality issues with the new engine, but no critical design flaws. The OEM has switched suppliers for the engine parts in question. First delivery of the B737 MAX to launch customer, Malindo Air, went ahead this Tuesday.
The LEAP-1B is manufactured by CFM International, a joint venture between Safran and General Electric. "Due to the extreme pressure that Safran is under to ramp up production of the LEAP engine, the board should immediately cancel the agreement to buy Zodiac Aerospace," TCI founder Christopher Hohn, wrote in the letter.
"Safran management has no capacity to integrate Zodiac or to execute the complex restructuring that will be required. At this critical time, the company should be focused solely on the ramp up of the LEAP."
Those in favour of the planned Safran-Zodiac merger pointed to an estimated Euros 200 million in near-term savings. It also will facilitate Zodiac’s recovery from a three-year period of missed deadlines and production of below standard aircraft cabin equipment, particularly the lavatories ordered by initial customers of the A350 aircraft.
Airbus and Boeing are pressing suppliers for discounts for aircraft cabin equipment in response to airline customer pressure for deeper discounts on aircraft purchases.
