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Euro Rise to $1.6 Means Bankruptcy for French Aviation

The rise of the euro towards $1.60 threatens bankruptcies in Europe's aerospace industry, the head of France's Dassault Aviation, maker of Falcon business jets and Rafale fighters, said on Tuesday.

"$1.60 is unbearable. With a euro at $1.60, some players could go bankrupt," CEO Charles Edelstenne said.

AP

He was speaking at a media briefing in his capacity as head of the French aerospace industry association GIFAS.

The euro traded at almost $1.58 on Tuesday having touched $1.5904 on Monday, battered by fears of more financial turmoil after the bail-out of a Wall Street bank and an emergency Federal Reserve interest rate cut to steady markets.

With aircraft and equipment generally sold in dollars against U.S. competition, the euro's 19 percent rise against the dollar in a year has spread malaise through Europe's aerospace sector which employs 132,000 people in France alone.

"The dollar has put such pressure on our profitability that we are no longer masters of our own destiny," Edelstenne said on behalf of France's 35 billion euro aerospace industry.

The French sector is dominated by Airbus parent EADS, which also has operations in Germany, Spain and Britain, and warplane and business jet maker Dassault.

Those companies sit at the top of a supply chain of hundreds of parts suppliers many of whom are also paid in dollars.

Edelstenne said the weak dollar had overwhelmed efforts to increase productivity and left manufacturers and their suppliers with no alternative but to shift more production outside Europe, something likely to cause a stir among unions and politicians.

"Our productivity gains only make sense when you measure them as a differential relative to gains in productivity made by our American friends. They are themselves not just sitting back but are making their own productivity gains," he said.

"At $1.60, the only choice is to offshore to low-cost countries or the dollar zone."

French aerospace supplier Latecoere, which makes doors for Airbus and Boeing jets, said on Monday it would build a plant employing 1,000 people in Morocco or Tunisia.

Edelstenne recalled that efforts by French President Nicolas Sarkozy last year to prompt the European Central Bank into taking action to cap the euro's rise had been rebuffed by German Chancellor Angela Merkel.

"My only hope is that now we are near $1.60 other industries are starting to hurt, especially the car industry. Maybe they will push Mrs. Merkel into changing her attitude and the current exchange rate level will show everyone we have a real problem."

Several German car firms are mulling boosting production in the United States to curb their dollar exposure, but Daimler chief executive Dieter Zetsche has said a firm should not make a structural production decision for short-term currency reasons.

Daimler is also a core shareholder in EADS.

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