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EXCLUSIVE-Airbus defense unit freezes capex, may miss cash goals - memo

PARIS, Oct 5 (Reuters) - Airbus Defence and Space has frozen capital spending and urged its 34,000 staff to take "drastic measures" to save cash as it faces the prospect of missing 2017 cash targets by hundreds of millions of euros, according to a memo seen by Reuters.

"With the risk of missing our full-year cash targets by hundreds of millions, we need to do something extraordinary together," divisional finance chief Julian Whitehead told an internal forum, according to a summary distributed to staff.

Airbus has said it expects 2017 group-wide free cashflow to be similar to 2016, before mergers and acquisitions (M&A) and customer financing. It does not publish cash targets for divisions.

Airbus Defence & Space, which has warned of continued cash pressures from the troubled A400M military aircraft program, is the European aerospace group's second-largest business after commercial jetliners and makes up 18 percent of revenues.

The division plans to set up what the memo called a "Cash Crisis" team to improve the situation before the end of the year, with all its programs expected to participate.

Until those plans become clear, all capital expenditure is being frozen with immediate effect across all the division's activities and across all its subsidiaries, the memo said.

Asked to comment on the memo, an Airbus spokesman said: "We are currently in the traditional year-end race in the commercial and government business."

He added: "It is key to remind our troops at this important time of a business year on the importance of meeting our cash objectives. That's the current ongoing effort at Airbus and it is rather standard procedure to achieve our quarterly and yearly divisional targets at Airbus Defence and Space without deviation." (Reporting by Tim Hepher; Editing by Sudip Kar-Gupta)