to about 40 percent of the global commercial aircraft market (to Boeing’s 60
percent). However, critics claimed that Airbus bought market share by sell-
ing aircraft at a loss, all the while receiving financial transfusions from its
national governments.
Under its former organizational structure, Airbus was its own worst enemy.
While many firms have functional organizations, Airbus’s structure might best
be described as dysfunctional—decentralization by default. According to a
long-standing political compromise, the construction of each new aircraft was
carved up in fixed shares among the partners. Germany and France (each with
37.9 percent stakes) built parts of the fuselage and assembled finished planes.
Britain (20 percent stake) built the main wings, and Spain (4.2 percent stake)
built parts of the tail. (General Electric produced the engines in a joint venture
with a French company.) This slice-and-dice organizational approach produced
inefficiency, duplication, and waste. The partners regarded each other as unre-
liable outside suppliers. Management meetings among the members resem-
bled games of “liar’s poker.” Each member tried to charge the highest possible
prices to other members for parts it supplied and to pay the lowest prices to
other members for parts it bought. Each fanatically guarded and kept secret its
financial information.
In 2000, after much infighting, Airbus was organized as a corporation.^17
Although it continued to produce its aircraft components in different
European locations, it tightly integrated production, assembly, scheduling, and
delivery, cutting costs, centralizing procurement, and expanding sales. In 2003,
Airbus delivered more planes than Boeing for the first time in its history. In
2007, continuing its management reforms, Airbus’s parent corporation (EADS)
announced that it was abandoning its dual French-German management struc-
ture in favor of a unitary executive. And in its biggest and most ambitious gam-
ble ever, Airbus is now producing and delivering a new super-jumbo aircraft,
the A380, with two decks accommodating 550 to 800 passengers.DECENTRALIZATION The trend toward dividing organizations along func-
tional and product lines creates pockets of specialized information dispersed
throughout the business organization. This phenomenon virtually precludes
the possibility of completely centralized decisions by top executives and the
board of directors. As a practical matter, even the most engaged CEO can
make only a small fraction of the decisions involved in managing a modern
business. To an increasing degree, the norm in the modern corporation is
decentralization.^18598 Chapter 14 Asymmetric Information and Organizational Design(^17) The shares of the new corporation were owned by European Aeronautic Defense and Space
Company (80 percent, itself a merger of the French, German, and Spanish interests, and BAE
Systems, the successor to British Aerospace (20 percent).
(^18) The extreme case of decentralization is breaking the company up. In 2008, Motorola announced
that it would split into two independent companies, one for its cell phone business and a second
for its television and electronics businesses.
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