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EADS Chief Stands By Top Management in Share Row

The chief executive of EADS, Louis Gallois,stood by the company's top executives amid a share trading scandal on Sunday and said the crisis had nothing to do with the health of the European aerospace company's business.

EADS has been at the centre of a media and political storm in France since a preliminary report on an insider trading investigation was leaked to a French newspaper on Wednesday.

EADS and shareholders have denied wrongdoing.

Gallois warned staff in a letter, supplied by EADS, that the Airbus parent firm would remain in the spotlight while the investigation continues. And he urged them not to let this compromise its recovery from recent A380 production problems.

"As you know, there are currently a number of legal cases pending. These will take time to resolve, and risk being the subject of saturated media coverage: a prospect I deplore."

He said EADS was a sound business and its top management remained focused on production and sales targets. "I want to express my confidence in them."

Stock Regulator Investigation

Airbus is preparing to deliver the first A380, the world's largest airliner, to Singapore Airlines on Oct. 15. But deliveries are up to two years late because of wiring problems.

France's AMF stock regulator is investigating whether executives and industrial shareholders knew of worsening delays when they sold shares between November 2005 and April 2006.

The worst tranche of delays was announced in June 2006 and led to a drop of 26% in the EADS share price.

Industrial shareholders Lagardere, a French media group, and German car firm Daimler announced the sale of 7.5% of EADS in April 2006. At the time, the two companies shared the EADS chairmanship. Both deny wrongdoing.

Airbus Chief Executive Thomas Enders told Germany's Focus magazine he felt "criminalised and stigmatised by the groundless allegations." He has denied ever committing insider trading.

The AMF's preliminary report cited 21 EADS or Airbus executives who had sold shares in the period under review, a judicial source said, confirming part of the Le Figaro report.

The interim AMF report has been supplied to French prosecutors and forwarded to an investigating judge. The judicial source said it does not make formal accusations and the AMF is not expected to file its final conclusions before 2008.

Sarkozy Urged to Intervene

The investigation has triggered a growing political row in France over the contrast between profits made by managers and shareholders and the group's plans to cut 10,000 jobs at Airbus.

A Senate commission is also investigating losses incurred by state bank CDC which bought 2.25% of EADS from Lagardere.

An opposition Socialist member of France's lower National Assembly, former European Affairs minister Pierre Moscovici, called for President Nicolas Sarkozy to intervene.

"This is quite simply a scandal. They imposed a (restructuring) plan on staff while the managers pulled out and made very substantial gains," he said on Radio J.

The controversy echoes a similar outcry over an 8.5 million euro pay-off for Gallois' predecessor Noel Forgeard last year.

EADS has been edging towards recovery after the A380 crisis and bitter in-fighting but faces pain from a weak dollar.

Sarkozy and German Chancellor Angela Merkel sought to shake up the company in July by abolishing a dual Franco-German management structure that had been blamed for its disarray.

Gallois said in his Oct. 4 letter to staff that the management reorganisation had marked "considerable progress" towards resolving corporate governance issues at the group.

EADS shareholders are now examining whether to simplify the capital structure with the introduction of golden shares to protect the strategic interests rather than big investor camps.

The French government controls 15% of EADS, Daimler and other German investors 22.5%, and Lagardere is in the process of halving its original 15% stake to 7.5%.