Lower tier French aerospace suppliers are feeling the financial pinch even as the bigger players ride the current wave of aircraft orders to healthy profits. Analysts warn that third- and fourth-tier suppliers have failed to adapt their business structure to new market conditions in the face of strong price pressures handed down by original equipment manufacturers (OEMs) like Airbus. These factors threaten their survival and could drive more businesses into foreign hands. Credit insurance firm Euler Hermes, based here, says a survey of 120 independent French suppliers—three-quarters of them small businesses—shows their position has deteriorated sharply during the past five years. They suffer from poor profitability and weak cash flow even as earnings, revenues and orders have rebounded for the commercial aerospace industry as a whole.
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