Chirac Says Action Likely on EADS 'Management Difficulties'

French President Jacques Chirac acknowledged management problems at Airbus parent EADS on Monday and said he would be "shocked" if insider dealing allegations against its French co-chief executive proved true.

The French government and other shareholders are "currently in the process of discussing what remedies need to be applied to the management of EADS as a whole," Chirac said in an interview broadcast on France-2 television.

"There's a problem with management difficulties that EADS, with its two chief executives and two chairmen, has encountered," Chirac said.

Shares in European Aeronautic Defence and Space Co. plunged 26 percent on June 14, when the company announced new delays to the Airbus A380 superjumbo, predicting that the production hitches would shave $2.5 billion off profits over four years.

Under the group's elaborate Franco-German structure, management and board positions are evenly split between French and German executives and directors.

Pressure is mounting on Noel Forgeard, the French co-chief executive, who made $3.1 million selling off EADS stock in March, just weeks before the company ordered an internal assessment of the A380 delays.

A second shareholder group announced legal action against EADS on Monday, as talks continue on an expected management shake-up.

"It's likely that something will have to be done, and that something will be done," Chirac said.

The French government, which owns 15 percent of EADS, is pressing for an agreement between Germany's DaimlerChrysler AG and French defense and media group Lagardere SCA - which own 22.5 percent and 7.5 percent respectively - on changes to governance practices at EADS.

France's Financial Markets Authority is probing Forgeard's transactions, as well as share sales by five other EADS directors and the two core shareholders, DaimlerChrysler and Lagardere.

If insider-dealing allegations against Forgeard turn out to be well founded, Chirac said, "I will be shocked."

But judgment should be withheld until the market watchdog completes its probe, Chirac added. "It is investigating. I will certainly not prejudge its decision or what it will find."

Finance Minister Thierry Breton held talks over the weekend with representatives of DaimlerChrysler and Lagardere.

Two people close to the discussions, who asked not to be identified because of the talks' confidentiality, said the French government has agreed to let the two private shareholders call the shots, as stipulated by EADS statutes.

Germany had voiced concern after French Prime Minister Dominique de Villepin suggested he was seeking a bigger state role in the management of EADS and a revision of its ownership structure, which scrupulously balances French and German interests.

"We don't see any reason for a change to the established structures ... and the joint leadership," German government spokesman Ulrich Wilhelm said Monday.

Amid mounting expectations of a management shake-up, EADS shares ended 3.3 percent higher at $28.44 - 10.5 percent below their closing price on the eve of the Airbus delay announcement.

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Melissa Eddy contributed to this report.


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