Airbus parent EADS faced wrangling in the boardroom over finance and protests in its factories over job cuts on Tuesday, hampering efforts to end a months-long crisis over jet production delays.
As 2,500-3,000 workers staged a half-day protest over jobs in the southwest French city of Toulouse, sources familiar with the situation disclosed that the French government was blocking advanced plans for a bond issue to raise restructuring cash.
The proposal caused deadlock at a board meeting on Monday, which also failed for a second time to set a dividend for EADS investors amid sensitivities in France over the potential impact on Airbus workers and voters ahead of presidential elections.
EADS management has secured backing from core industrial shareholders for a deferred equity capital increase involving a bond issue that would result only later in the issue of new shares, three sources involved in the matter told Reuters.
But the French government, which openly favours a share issue sooner rather than later and has expressed a readiness to pump in cash to save Airbus, opposed the planned method at board talks on Monday, said the sources, all asking not to be named.
What the government wants is a "classic" share issue open to all investors, a source familiar with the issue said.
"There were disagreements between the French state and the industrial shareholders on this issue at Monday's board meeting," the source added, adding there was no hurry for a capital increase in the French government's view.
Private Industry and the State
The deadlock is seen as another proxy battle over the most serious issue to have haunted EADS employees and shareholders since its creation from a multinational European merger in 2000, namely, the relative roles of private industry and the state.
Co-Chairman Manfred Bischoff, who represents major German shareholder DaimlerChrysler, blasted the French state for meddling with Airbus in Le Monde on Monday, two days before he is expected to take over as chairman of DaimlerChrysler itself.
With Airbus job cuts having rocked the start of campaigning for presidential elections in late April, the conservative government has said it wants to act quickly to bolster Airbus.
But industrialists suspect Paris of masking an agenda of manoeuvring its partners into ceding more of their shares in favour of either the state or a new set of industrial backers.
In a secondary dispute, EADS has still not agreed a dividend for 2006, when its profits fell sharply, the sources said.
Industry sources say DaimlerChrysler wants investors who have weathered a prolonged crisis and share volatility at the group to receive at least some cash return on their investment for last year, despite an 89 percent drop in net profit.
French industrial shareholder Lagardere has also voiced support for a dividend, while saying it would reinvest its share.
But the French government fears a dividend to investors could backfire days before the decisive May 6 run-off vote.
Prime Minister Dominique de Villepin has called on EADS to abandon a dividend, and conservative presidential front-runner Nicolas Sarkozy has questioned the ethics of rewarding investors while thousands of Airbus workers worry about their future jobs.
The dividend issue could make headlines in France, where Socialist candidate Segolene Royal has attacked "easy profits", but it is the row over new funds that is said to most severely test the power balance inside Europe's top aerospace group.
EADS declined comment on the row, which leaves a key question over its funding ahead of a shareholder meeting on May 4. Its shares rose almost 2 percent to 23.82 euros on signs that any funding boost would not mean a new share issue soon.
An EADS spokesman said only that an agenda would be issued in time for the shareholder meeting.
The French government declined comment.
Job cuts both at Airbus and telecoms equipment firm Alcatel Lucent have been a major issue in campaigning for French presidential elections later in April, with all parties pressing for various degrees of public support for the jetmaker.
Tuesday's walkouts were the latest in a series of brief strikes since Airbus announced 10,000 job cuts a month ago.
"I'm here because the plan means death for my job," assembly worker Bernard Camuzet told Reuters. "With or without the unions, I will do everything I can to save my company."
An Airbus spokeswoman said the walkout involved less than a quarter of Toulouse workers, and operations were not badly hit.
Airbus is desperate to prop up finances weakened by a weak dollar, delays in the A380 and penalties payable to angry customers.
It also wants to sell all or part of six European factories to help pay for its next new aircraft, the 10 billion euro A350, which it needs to catch up with a resurgent Boeing.
Cracks also started appearing, meanwhile, between unions over tactics for opposing the "Power8" Airbus restructuring plan.
Tuesday's action was orchestrated by the Force Ouvriere union and backed by France's two largest labour groups, the hard-left CGT and more moderate CFDT. But white-collar union CGC and centrist CFTC refused to take part, saying it would be "irresponsible and suicidal" to disrupt assembly lines. (Additional reporting by Nicolas Fichot, William Emmanuel)