TheChek News Flow

Private equity giant TPG Capital seriously considered buying Herbalife last year — as part of an ongoing interest in the multi-level marketing industry, The Post has learned.

“They took a long look at Herbalife” one year ago, a source with direct knowledge of the situation said.

TPG also considered buying Nu Skin, the source said.

It is not known why TPG’s interest in Herbalife and Nu Skin ended without any investment.

Both companies have issues with regulators.

Presently, TPG is reportedly looking at acquiring Avon — a third multi-level marketer.

A Wells Fargo analyst Friday was skeptical of the prospect — and said as much in a report to clients — sending Avon shares down 7.9 percent, to $7.98.

A day earlier, a report concerning talks between TPG and Avon sent shares up 15 percent.

If TPG does not buy Avon, it “might take a new look” at Herbalife with its stock falling in half over the last 12 months, the source said.

Avon is trading at a 7.65 times EBITDA multiple, and the arguably more challenged Herbalife at six times the 2015 EBITDA projections of Barclays analyst Meredith Adler.

While it is not known why the TPG-Herbalife effort ended a year ago, Sen. Ed Markey (D-Mass.) on Jan. 23, 2014, called for an investigation into the maker of protein shakes. Soon thereafter, its shares began a descent that has cut its value by more than 50 percent.

In early February 2013 Herbalife borrowed money to buy $1.5 billion of its shares at $65.

Three weeks later, on March 12, the Federal Trade Commission announced a probe of the company — followed by reports of a Justice Dept. investigation in April.

State attorneys general and the Securities and Exchange Commission are looking into the Los Angeles company as well.

Herbalife has operated under a cloud for the past 25 months, following accusations by activist investor Bill Ackman that it is a pyramid scheme.

The accusations, which the company denies, sparked the probes.

Modal Trigger

For the past two quarters, Herbalife missed Street profit forecasts, and its earnings and cash flow have declined.

Plus, Herbalife needs to refinance $875 million of debt by March 2016 and recently said it has been unsuccessful in doing that.

TPG, in the offering memorandum for the $10 billion private equity fund it is presently raising, describes what it looks for in consumer companies.

We “invest behind unique brands, products and services, defensible and specialized distribution models.”

“We have focused our sourcing on businesses that skew either to the higher-end or lower-end consumer, consistent with our thematic focus on differentiation in an increasingly crowded retail landscape.”

TPG and Herbalife declined comment.

A billionaires’ brawl in the Bahamas has become a high-dollar court battle.

New York hedge-fund tycoon Louis Bacon has slapped Canadian fashion magnate Peter Nygard with a $50 million defamation suit, charging that Nygard has orchestrated a smear campaign that has falsely accused Bacon of being a racist, drug-trafficker and murderer.

According to Bacon, Nygard has been the next-door neighbor from hell on the exclusive beach strip they share in the Clifton Bay area of the Bahamas, spreading vicious gossip about him online and in local newspapers.

The decade-long battle started as a property-line dispute between Bacon and Nygard, who has an adjoining estate in the luxurious Lyford Cay community.

In one instance, Bacon accuses Nygard of doctoring an October 2011 CBS News report about the arrest of Wall Street titan Rajat Gupta for insider trading. The doctored video superimposed Bacon’s name and face over Gupta’s, falsely alleging that Bacon was at the center of a “billion-dollar scam,” according to the suit.

Elsewhere, the suit cites a flurry of speculation in local Bahamian media after Bacon’s house manager, Dan Tuckfield, died in the billionaire’s pool in May 2010. While official reports cited a heart attack, Nygard used local media to spread rumors about a murder and cover-up by Bacon, the suit claims.

“Louis Bacon filed this lawsuit to hold Peter Nygard and his companies responsible for their unlawful and reprehensible smear campaign,” Bacon’s attorney, Orin Snyder, said in a statement. “We look forward to our day in court.”

Nygard’s representatives denied Bacon’s allegations, calling them a move to distract attention from Bacon’s own agenda.

That includes, according to Nygard, a high-level conspiracy by Bacon to “unseat the ruling political party in the Bahamas” — all for the purpose of installing cronies in local government to block the reconstruction of Nygard’s estate after it was destroyed in a “suspicious fire” in 2009.

“Mr. Bacon has falsely and maliciously accused Mr. Nygard and [Bahamas] Prime Minister Perry Christie of government corruption,” according to Nygard reps. “In fact, Mr. Bacon has falsified evidence of corruption.”

Bacon’s suit, which was unsealed in New York state court late Thursday, charges that Nygard’s smear campaign has “continued to this day.” Last July, the suit charges, Nygard organized a march in Nassau, with demonstrators carrying placards that read “Louis KKK Bacon” and “Moore Capital Management,” the hedge fund Bacon owns.

In a statement, Nygard said some of Bacon’s ancestors were members of the Ku Klux Klan and that in a speech last year, Bacon made “a galling reference to the racist novel ‘Gone with the Wind” as his ‘holy book’ and guide.”

With Oil Prices at a Six-Year Low, Here Are the Options for Investors—and the Risks

As oil prices continue to sink on concerns about weak global economic growth, investors might be tempted to pick up some energy stocks on the cheap. Dan Strumpf joins the News Hub. Photo: Getty.

The sharp fall in oil prices has wreaked havoc on shares of energy companies, leaving investors to decide whether now is the time to go bargain hunting.

U.S. crude prices have fallen by more than half since June, trading at a six-year low of around $45 a barrel. For motorists filling up their tanks with sub-$2 gasoline, that has been a cause for celebration. But for investors in the energy sector, it has been a calamity.

The S&P 500 Energy index, comprising the industry’s largest companies, lost more than a fifth of its value over the six months through Thursday, the biggest decline of any of the 10 major sectors, according to FactSet. The broader S&P 500, by contrast, rose 4%.

The pain has been worse for shares of smaller producers, many of which took on loads of debt to finance new drilling. A barometer of small energy companies, the S&P SmallCap 600 Energy index, has swooned 47% in the past six months.

Experts warn that the wild swings in energy stocks could continue for some time. While blue-chip names like Exxon Mobil have offered energy investors some insulation from volatile oil prices, producers and service companies are more vulnerable to the tumult—but have more to gain should oil prices stage a rebound.

Investors essentially have two ways to play the energy market: for stability and income, assuming the oil price stays at current levels or even dips more, and for growth, assuming a price rebound will come sooner rather than later.

Here’s what you need to know.

Income and Stability

Investors thinking about getting into the sector should have a stomach for volatility and an eye for the long run.

Experts agree that oil prices will rise out of their doldrums eventually, but how long until a rebound takes place is a matter of fierce debate. This month, analysts at Bank of America said they expect U.S. oil prices to fall to $32 a barrel by the end of March before climbing to $57 by the end of the year.

“You can’t look at the sector and think you’re going to be lucky enough to time the bottom,” says Russ Koesterich, chief investment strategist at BlackRock , which manages $4.65 trillion. “You have to be thinking about it for the longer term, realizing you may see the stocks down 10% or 15% before they bottom.”

The upheaval has sent many pros seeking shelter in integrated oil companies—blue-chip energy firms that control the wells that draw crude from the ground and the refineries that turn it into fuel. They owe their stability to their diverse business mix and rock-solid balance sheets.

Oil production is likely to keep growing, despite the decline in prices, thanks to advances such as hydraulic fracturing, or fracking. Earlier this month, the International Energy Agency said it expects nearly one million barrels a day of extra oil to be pumped around the world in 2015. Global economic growth, meanwhile, remains sluggish, damping growth in demand.

Shares of Exxon Mobil are down just 10% in the past six months. Fellow Dow Jones Industrial Average component Chevron is off 18%—no picnic, but better than many rivals.

“They are less of a pure play on oil,” Mr. Koesterich says. “Relative to the rest of the sector, the correlation between the integrated [companies] and the oil price is much less.”

Steady dividends are an added benefit. The oil industry has seen downturns in the past, but neither Exxon nor Chevron, for example, has cut its dividend in decades. In a cash pinch, both would have plenty of room to curb share buybacks first, says Lysle Brinker, director of equity research at consultancy IHS Energy.

The dividend is “the only reason, for some investors, why they own these stocks,” Mr. Brinker says.

Investors with an appetite for energy stocks, but not for stock-picking, have plenty of options among exchange-traded funds and actively managed mutual funds.

The biggest energy-focused ETF is the $11 billion Energy Select Sector SPDR Fund, which tracks energy companies in the S&P 500. The fund charges annual fees of 0.16%, or $16 per $10,000 invested.

Among mutual funds, the $10.1 billion Vanguard Energy Fund has weathered the downturn in oil prices better than its competitors, according to investment researcher Morningstar.

It has lost 25% in the past six months, compared with a 29% drop among all energy funds. The fund charges annual fees of 0.38%.

The Vanguard fund’s relatively heavy tilt toward integrated energy companies and its lighter weighting of more beaten-down corners of the sector has helped its performance, Morningstar analyst Kevin McDevitt says.

“You’re getting the commodity exposure, you’re getting the energy exposure, but you’re not getting all the volatility that comes with it,” he says.

Another option: the $3.6 billion T. Rowe Price New Era Fund, which invests in the energy industry as well as miners and other resource producers. It weathered the crude downturn by boosting its holdings of integrated oil companies beginning last summer, Mr. McDevitt says.

Over the past six months, the fund has lost 19%, compared with a 22% slide for the broader category of natural-resources funds. It charges an annual fee of 0.66%.

Master Limited Partnerships

Another popular energy bet for income-hungry investors has been master limited partnerships, the pipeline and storage firms that earn their keep transporting and storing oil and natural gas.

MLPs pay most of their earnings to shareholders, a draw for income-starved buyers. And since they focus on storing and moving products, MLPs are seen as more insulated from turbulent prices.

The Alerian MLP index, a barometer of the industry, yields 6.16%, compared with less than 2% on 10-year government debt. But the index has lost 14% of its value over the past six months, making MLPs far from immune to oil’s tumble.

“A lot of people have gone out and said [MLPs] are uncorrelated to oil prices, but that’s simply not true,” says Richard Bernstein, head of the $3.4 billion firm Richard Bernstein Advisors in New York.

As long as U.S. energy demand holds up, oil will continue to flow through the pipes and MLPs will remain a good investment, says Simon Lack, founder of investment-advisory SL Advisors in Westfield, N.J. Indeed, fuel demand is on the rise over the past year, according to the Energy Information Administration.

“The biggest fear for MLP investors is demand destruction, and we’re in the complete antithesis of that,” Mr. Lack says. “If anything, lower energy prices are going to result in more demand, not less.”

But MLPs could see more pain if their oil-company customers start demanding lower prices, Mr. Bernstein says.

Investors have an array of options when it comes to MLP funds, including the $9.1 billion Alerian MLP ETF. Another popular option: the $5.6 billion JPMorgan Alerian MLP Index exchange-traded note. Both charge annual fees of 0.85%.

Investing for a Rebound

If giant oil companies and MLPs are partly insulated from oil’s tumble, they also are less likely to climb as quickly should crude stage a big rebound, experts say.

With U.S. output still rising and the global economy in low gear, that rally still could be a long way off.

But that doesn’t mean prices will stay under $50 forever. When and if they rebound, exploration-and-production, or E&P, companies will likely be among the first to benefit.

“Nobody is making money at the $45-a-barrel level,” says Norman MacDonald, portfolio manager of the $991 million Invesco Energy Fund.

But that means supply has to decline and prices will rebound eventually. “It’s a very self-correcting mechanism,” he says.

The cost of producing oil varies widely from place to place, even in North America, where wells are newer and production costs typically higher. Among Mr. MacDonald’s biggest holdings are Devon Energy , Canadian Natural Resources and Ultra Petroleum . All are producers concentrated in North America but with relatively lower costs of production.

“If oil stays at $55, $60 a barrel, they will survive,” he says.

John Dowd, who runs the $2 billion Fidelity Select Energy Portfolio, says he is paying closer attention to the quality of the underlying company assets when deciding when to buy, instead of focusing on traditional valuation metrics such as price/earnings ratios—in large part because both prices and earnings are in such upheaval, he says.

“You want to buy an energy stock when the outlook is dark and dreary, and right now it’s pouring,” he says.

One temptation investors should avoid, experts say, is betting on the price of oil directly, which can be done via oil futures contracts or ETFs that invest in them, such as the $1.4 billion United States Oil Fund, which charges annual expenses of 0.76%.

The concern: Oil-futures contracts expire monthly, requiring investors to roll into the subsequent month’s contract on a regular basis. This process can take a big bite out of returns when the longer-term contract is more expensive than the expiring contract, as is the case now.

At current prices, that penalty amounts to a 12% erosion of annual returns, according to John Gabriel, a strategist at Morningstar.

“For an individual investor, I would never really recommend getting involved with the commodity itself, because it’s kind of the Wild West,” says David Kelly, chief global strategist at J.P. Morgan Asset Management.

Playing the Field

An E&P-heavy bet can be played with the $1.4 billion SPDR S&P Oil & Gas Exploration & Production ETF, which charges an annual fee of 0.35%. Another option is the $445 million iShares U.S. Oil & Gas Exploration & Production ETF, which levies a 0.43% annual charge.

When oil producers are feeling the pinch of cheaper crude, one of the first things they do is cut their spending. That translates to lean times for oil-field service providers such as Schlumberger , Baker Hughes and Halliburton —the firms that lease the drills, blast open the wells and service the equipment that makes the oil flow.

The S&P 500 Oil & Gas Equipment & Services index has plunged 32% over the past six months. Analysts at Barclays say capital expenditures by energy companies are set to fall 9% this year, the first spending drop in six years.

But like exploration-and-production firms, service companies stand to gain from a rally in oil.

“A more aggressive investor that thinks there’s going to be a rebound would probably go with the service providers and the equipment providers, because those guys have been hit the hardest but stand to rebound the most,” Morningstar’s Mr. Gabriel says.

Mark Dawson, chief investment officer at Seattle-based Rainier Investment Management, says he cut his holdings of energy stocks as they rose and fell last year. Today, the percentage of investments the $6.7 billion firm allocates to energy is in the mid- to low-single digits, he says.

But one stock the firm has held on to is Schlumberger, because of the service giant’s global footprint and strong assets. “Any stabilization in the energy market, this would be at the top of the list to either add to or build back up,” he says.

Fund investors can make a concentrated bet on oil services with the $1 billion Market Vectors Oil Services ETF, which charges an annual fee of 0.35%.

QE and equities: easy come, easy go

Buying European equities may make sense, but they are hardly good value

Woohoo! We’re off to the races. QE is supposed to be good for equities — as central banks buy bonds, money moves elsewhere and up go share prices. And so on Thursday, when Mario Draghi got out his €60bn per month cheque book, up went the Euro Stoxx 50 (eurozone blue-chips) by 2.3 per cent. That was followed by another 1 per cent on Friday. The index is up over 7.5 per cent in 2015 — almost 3 times last year’s return. That’s no surprise — the US, UK and Japanese indices all did well in the months after QE announcements.

Hold on though. European stocks do not look particularity cheap. QE may drive up share prices but the US version (and anticipation of the ECB’s generosity) has already helped eurozone equities. The Euro Stoxx 50 has a price to forward earnings ratio of 17, well above its long-run average of 14. The index, like the S&P 500, passed its 10 year average p/e in 2013.

Still if you must join Mr Draghi’s bandwagon, it pays to be selective. According to UBS, cyclical sectors such as mining, autos and chemicals consistently outperformed the national benchmark indices in the six months after QE announcements. Construction materials and mining stocks did the best, beating the market by 10 per cent on average (although just now there are reasons to be wary of the miners). Defensive sectors such as transport, utilities and food products consistently underperformed. Whatever you choose, though, bear in mind that valuations already look stretched. Keep the Dom Pérignon in the bucket for now.

Puig, the Spanish fashion and fragrance business, has announced the acquisition of Penhaligon's and L’Artisan Parfumeur from Fox Paine & Company with effect as of 23 January 2015.

Penhaligon’s is one of the most prestigious British fragrance houses with its own retail network and a global presence.

L;Artisan Parfumeur operates retail boutiques in France and has a global presence.

Citing people with knowledge of the situation, Spanish daily La Vanguardia said Puig was thought to have paid EUR 100m to acquire both companies.

Source La Vanguardia

(pdf in german attached)

She need reliable figures, says Katrin Suder, no intermediate states. It's Monday night this week, Defense Ministry in Berlin, the Office of the Secretary of State. She Bernhard Gerwert Airbus Defence & Space guest, to professionals. Suder is not amused at all.

     They talk about the A400M, a transport aircraft for the military, which was to fly since 2008. But only at the end of last year, Airbus has delivered the first copy to the Air Force. Five more were to follow later this year. Since last week, it is certain that this will not happen. A series of mishaps galactic scale continues.

     How many machines this year ?, asks Suder. Not no, says Gerwert. Maybe two. Maybe three. When? End of the year, but also the end of the year was still 2015, says Gerwert. Suder said, it is reported, it is irrelevant whether the machine come in December 2015 or in January 2016 and. Is relevant that the machine for a year missing. And the others were still missing longer. Gerwert offers a compensation. Airbus plans to hire the Bundeswehr a factory tanker aircraft A330 with military approval. They wanted to meet the Government and with "Euro Fighter". But it can not replace the A400M. Suder decide instead to spare parts for the old Transall that must fly longer now.

     There are problems with the hull. Which existed earlier, just as there were problems with the engine, the software, the arrival

operation, the loading dock. The only machine that is now in the Air Force in Wunstorf, six years came too late, is equipped worse, but 40 percent more expensive than planned.

     This means that the policy had resigned. But that extradition further delayed Suder makes a bad mood. It is changed to Defense of McKinsey including with arms sales Minister Ursula von der Leyen not as embarrassing as their predecessors. And now, another delay. The A400M is the breakdown bird of the republic. "The measures announced by Airbus renewed delays in the A400M meet the worst possible time," says von der Leyen, "here is far more at stake than the image of an industrial company, it's about Germany's reliability in its alliances."

     In over ten years evolution was absurd much wrong. And even before that, in the years of planning, the project came to a slippery slope, because politicians were not looking for a sensible solution, but a politically appropriate.

     Der Spiegel has the history of the A400M reconstructed from the early plans today. For discussions were held with many stakeholders, politicians, civil servants, a test pilot; also managed to sift confidential reports and documents. The image of a disaster, are responsible for the political calculus, bureaucratic, technical incompetence, lack of control and the monopoly of Airbus arises. It is also about Europe, at the cost of supply

sammenwachsens.

     What has happened around the military transporter, happened and is happening on other projects of the Bundeswehr, the NH90 transport helicopter, during the reconnaissance drone "Euro Hawk". You're late, are much more expensive or do less than expected. This story is therefore also for others. It stands for the problems that must be solved Ursula von der Leyen.

     Sevilla, in October 2014: Thomas Wilhelm sitting in the cockpit of an A400M, which is in a factory of Airbus. Screens, switches, levers, this great obscurity from which the fly is created. I Hope So. A screen is not working. No matter Wilhelm skips the routine. He explains joyful, almost lovingly. He likes this aircraft. His face is narrow, the mustache trimmed precisely, shorn hair short; round wire-rimmed glasses, athletic body. William is a test pilot at Airbus.

     Koblenz, in December 2014: Ronald Ebbers, 49, sitting in a meeting room that is sparsely furnished, tables square, a coffee pot, plastic jars with coffee cream, the great wasteland to grow out of ideas. Ebbers begins his third cup of coffee. "We walk here on coffee," he says. Full-bodied, bald. He was a naval aviator, he now works at BAAINBw, the military procurement office of the Bundeswehr. It developed, tested, one buys. Ebbers is the project manager for the A400M.

     Nothing has the professional lives of William and Ebbers as strongly as this aircraft

The general purpose flyer

3D graphics Facts and figures on the A400M transport aircraft: How much charge it can support? What components are finished - and which still does not? An overview.

convincing. For nearly 20 years, they are concerned with the transport plane, as a pilot, other than official. Both had moments where they could no longer believe

that the military Airbus will ever fly. Now he flies a bit. And both men have a share in it. The history of the aircraft is also theirs.

     The mid-nineties, Thomas Wilhelm sitting in the cockpit of a transport aircraft Transall C-160, the Bundeswehr and fly to Sarajevo. The civil war in the former Yugoslavia has just ended, but still be drunk irregulars drive around in the Serb-controlled areas, and sometimes they shoot at aircraft.

     Wilhelm must fly to steep the runway, the steeper, the shorter the approach, the lower the risk to be made. He tends the plane with an approach angle of six degrees. Three degrees are normal in air traffic. The Sarajevo-approach becomes a fixed term in the flyer language.

     Lieutenant Colonel Wilhelm you fly the Transall, but he knows that she is too weak and too small for what is to come, the auxiliary and military operations around the world. In addition, it is already being used since 1967. In the drawers of the Defense Ministry in Bonn have been available since the eighties plans for a "Future Large Air- craft ", a large transport aircraft for the future.      When Thomas Wilhelm fly to Sarajevo, Volker Ruhe's defense minister a black-yellow coalition under Chancellor Helmut Kohl. He finally wants to be a successor to the Transall in order. In 2008 it will be ready.      The machine must be able: lift 32 tons into the sky. Transport over a hundred paratroopers and off in the air

     

set. Distant targets without stopping reach. In the air to be refueled, discard freight pinpoint accuracy. Start and land on short runways, on grass or gravel. Detect enemy radar and anti-aircraft missiles distracted by a fireworks rain. The Sarajevo-approach.

     There is a prototype of a machine, the Antonov An-70, which can most of it, which would only be further developed. However, it has a problem, she comes from Russia and Ukraine. The alternative would be a new development of a joint venture of States of the European Union, today's Airbus Group.

     Rühe relies on the Antonov. It is relatively cheap and would have after some upgrades soon. But above all, the French are skeptical. The examination of the two alternatives is to be completed by 1999. One of the examiners is Ronald Ebbers. In 1998, he worked as a consultant in military procurement office in Koblenz. "The Antonov was for those days a very convincing transport aircraft," Ebbers says today.

     In the fall of 1998 federal election. Black and yellow loses, Chancellor Gerhard Schröder is, Scharping defense minister.

     They give the insistence of the French and other Europeans and opt for the Western European transport aircraft. For them it is not about technology or money, it's about politics. The aircraft is to deepen European integration and the unemployment

A400M project Ebbers "Three steps forward and four back"

relieve fluid.

     What happens then is stupid. The politicians say Antonov off before they have a price has been agreed with Airbus. This policy has created a monopoly situation, and the revenge immediately. Walter Kolbow, Secretary of Defense, wrote in October 2000: "However, Airbus Military looks after the competition in a monopoly situation and shows only a limited responsiveness of prices and key points such as a price escalation clause."

     In September 2001, looks at the Green parliamentary deputy Oswald Metzger in Section 14 of the 2002 budget for the defense department and wonders. Scharping want to order 73 Airbus Military, but what he wants to pay? The Bundestag has ten billion dollars (5.1 billion euros) for this

ses project approved. After assessment butcher's enough for 40 aircraft. Scharping says that he needs 8.5 billion euros, almost 17 ​​billion dollars. Metzger fought it on.

     But 2002 is an election year, the Red-Green coalition can not use internal strife. Metzger and two other household Green politicians are asked by their group leaders for an interview. As a butcher enters the room, he is stunned. There sits, without notice, the green Foreign Minister and Vice Chancellor Joschka Fischer.

     Metzger says, the A400M was overpriced, he could not agree to the project so. Fischer is loud, running around the room, gesturing. "This will not do," he exclaims, "You, the government in question."

     In order to keep costs under control, Scharping tried the "Commercial" approach (Commercial Approach). As in the civil aviation sector he wants to negotiate a fixed price with the manufacturer. Which is then largely due upon delivery. This Scharping protects the timely households, and he protects, theoretically, in a cost explosion. The manufacturer must avoid so that its margin remains.

     Scharping told that he had invited the former head of the Airbus Group, Louis Gallois to the Defense Ministry and requires a fixed price. "Otherwise we are not," he said. Gallois agrees.

     An important question is still unsettled. Where does the engine? It must be extremely powerful to the heavy aircraft

with a heavy load safely drive through Sarajevo approaches. Pratt  &  Whitney can build such a power plant, which is why Airbus proposes the politicians to shop there. But Pratt  &  Whitney has a problem. The company is not in Russia, but in North America, and Schroeder and French President Jacques Chirac have the ambition to be built, the A400M completely in Western Europe.

     Therefore, to develop a new engine, a European consortium. The price is 436 million euros over the Pratt  &  Whitney. For confidential documents of the government shows that German officials the "unacceptable" consider. But the consortium refuses to go down far enough with the price.

     What to do? Politicians are more likely than others willing not to accept reasonable prices because they do not pay the bill itself, but the taxpayers.

     At the edge of the four summit on the European Security and Defence Policy in Brussels on 29 April 2003, Schroeder and Chirac agree that it from "economic, employment and technology policy reasons acceptable would be" to provide the European consortium a grant of 100 million euros. Now the citizens pay their taxes twice for the A400M - the total price at Airbus and part of the engine price the consortium.

     On 27 May 2003, the contract for the Airbus A400M is signed. The machine

The first of its kind

Video (2:07) SPIEGEL editor Gordon repinski has the first A400M, which the Bundeswehr scored delivered inspected, - his impressions in the video. (PHOTO: MAURICE WHITE / OSTKREUZ / DER SPIEGEL)

can be developed and built.

     The first to screw it up really, are the engineers working on the engine. First, they had the idea, no com-

to develop convert pletely new propeller unit, but the jet engine of a French fighter jets. This saves cost, good idea. They developed and devel-

oped, but soon they realized that this engine is too weak for the A400M. They start from the beginning. But even with the technology of the new engine it hakelt.

     For Thomas Wilhelm is in 2005 a dream come true. Even when studies in Munich the A400M has irritated him. "I want to work on it that the bird will fly someday," he thought. Now he works for the inspection service of the Bundeswehr Technical Center of the Bundeswehr in Manching near Ingolstadt. He seeks to support the development of the A400M. His specialty is the flight management system, the digital machine head. In six years he spent 550 days working at Airbus in Toulouse, where the cockpit is built. Because there are problems, massive.

     The engineers in Toulouse had an idea that would save money. They went out from the cockpit of civil engine A380. But a military aircraft must be capable of much more, for example, must second accuracy can fly to a precise location, and then throw a pallet on a parachute.

     The civilian software refuses to speak to military service, she bucks and bucks. In 2008, when the transport plane was supposed to be delivered, a low point is reached. "There were moments when I thought the machine would never take off," says William.

     Similar crises experienced Ronald Ebbers, operating from 2004 to 2008 in the OCCAR in Bonn, a kind of umbrella organization, the joint defense projects of European countries coordinated. He is there adviser to the director with

special responsibility for risk management. All problems of all countries with the A400M run together with him.

     Soon he realizes how complicated this project. The bureaucracy makes it difficult to respond quickly to problems, to act. "Everywhere there are working groups on various topics," says Ebbers. A printed PowerPoint presentation he shows the structure of responsibilities, they will not fit on a single sheet. In red, blue and yellow boxes working groups and hierarchy levels are interconnected. There are dozens. Even Ebbers has struggled to find his finger between the different sheets get all the right boxes as he explains the responsibilities.

     "In 2007 began a difficult time," he recalls. "For the manufacturer Airbus, the complexity of the project was immense." Common themes emerge that no one had considered. Emergency meetings, experts from across Europe will discuss in Toulouse. "Then the left again," says Ebbers.

     The commercial approach shows its drawbacks. The authorities can work on aircraft control only at pre-set times, otherwise only when Airbus agrees. You can not specify in detail how the technology has to look as long as a certain result is achieved Airbus. "Functional Specification" called Ebbers that.

     Example: The contract is not that powerful propellers shall be fixed as a protection from the wind with a mechanical brake if the A400M on the airfield

is. Airbus therefore plans no propeller brake. We need a brake, the Defense Ministry intervenes, if it were a matter of course. Airbus says: Look into the contract because their is nothing of a brake, so there is no brake.

     week long dispute, but Airbus offers just a cheap solution. Belts should fix the propeller. No straps, says the ministry. There could wish for an elegant solution, a button in the cockpit, fixing your fingertips. Just so the goal of "Fit for Purpose" had been reached maturity.

     knob counter belt. The dispute takes place over months. Then Airbus gives in. But now there is a bad mood in Toulouse.

     "At the time we had to find the first time," says Ebbers, "that there are different views as the contract is to be interpreted." The mood was visibly irritated, often you went to the meeting with no result apart. As of 2007, Ebbers has the impression that something random "into trouble". You could tell that, he says, "the dialogue was no longer fertile." Ebbers got a "bad feeling".

     As is the Sarajevo-simulated approach, the propeller will start to wobble. Problems even at the loading dock. Problems in the control of the motors. Problems with drive. However, problems here are not called problems, but poor performance, although this does not sound better.

     But there is a success. The engine engineers proudly turboprops, the

Defence Minister von der Leyen (*) Project on slate path (STEFFISBURG LOOS / COMMON LENS / DDP IMAGES)

achieve an output of about 8200 kilowatts. The above has so far only the Antonov.

     However, there is a new problem. When Antonov the distance to the fuselage is greater than in the A400M. In addition, the twin propellers work in the opposite direction, which reduces the vibrations. This technique is in the A400M not in use.

     At high power, it shakes the body through so that no screw thread

remains. So the hull must be strengthened. No Problem. When this is done, the technician noted that the machine is overweight and may no longer stand out. The bird is bold like a Christmas goose and also sedate. Desperately the engineers working on a hull. The project seems doomed to fail.

     How could happen so many mishaps? One reason is that the manufacturer of 2006

Almost a thousand people, including many engineers, detracts from the A400M to the A380. The development of the passenger plane makes problems, and companies prefer to have trouble with the state as private customers such as Lufthansa. "The public customer is perceived as stupid customer," says Rudolf Scharping. In the confusion of responsibilities can the question of guilt darken easily when there are problems.

     As the reviewers of the KPMG surveyed the disaster in the A400M and other military major projects in the past year, they came to the conclusion that the withdrawal of professionals, the "strong utilization of resources ", ultimately" was an important cause "for the delay. "It can be assumed that not A400M (more) comes first in the Airbus internal prioritization of programs." Thus passes the year 2008, the year of the planned deliveries.

     On 11 December 2009 raises a prototype of the A400M first time off. The software does not work properly, the engines are not working properly. Only with difficulty can avoid the test pilots to abort the first flight.

     Less than a month later, the lame bird is in its assembly plant in Seville. Here the bulk items will be delivered the hull of Germany, the cockpit from France, the wings from the UK. Now is quiet in the hall, a lectern, chairs for visitors New Year press conference with Tom Enders, who now for the A400M

is responsible, the son of a shepherd from the Westerwald, paratroopers, Boyfriend pithy words.

     The A400M threaten "the whole company to compromise," he calls to journalists. The plane cost about eleven billion euros more than planned, he would have to cancel the project if no help coming. "We hope for the best and plan for the worst."

     A bluff? Enders traveling to Germany and makes the Chancellor's Office and the Ministry of Defence realized that he would have no problem to write off the investment made ​​and to pay penalties. If you Enders today asks, he says: not a bluff. A new contract is negotiated. Fixed price ade.

     Hans-Peter Bartels, now chairman of the Defense Committee, was then in the SPD defense expert. He also emphasized the "high industrial policy and national economic interest" in the project. Now he does not want it to be a failure. "Enders has left us no choice," says Bartels, "it was just a matter of saving the project anyway." He agrees new contract and convinces his own group. "It was at this point there is no realistic alternatives to the A400M more," says Bartels. Because the politicians do not want to end up with empty hands, they are vulnerable to blackmail.

     The cost of the customer to increase by two billion euros, Germany must carry around a third of it. In addition, Airbus gets a loan of 1.5 billion euros

Due ready

Video (3:43) The military equipment of the Bundeswehr is not in good condition. Many combat and transport aircraft of the Air Force are not airworthy and must remain on the ground. SPIEGEL TV about the dilapidated condition of the army. (AXEL HEIMKEN / DPA)

at very favorable terms. And a new, later delivery plan is agreed.

     The contract is adventurous: higher costs

th, fewer aircraft, lower power planes, and even later.

     The Bundeswehr gets only 40 machines. Another 13 are to time to the rest

Countries be resold. Four initially requested properties are eliminated. Thus, the viability of the ramp is reduced. 81 functions are added later. From the jump apparatus for paratroopers over the air refueling to self-protection system that lacks pretty much everything that could distinguish the A400M by a civilian cargo plane.

     The household politicians are not initially able to discover the true cost of each machine, since the new contract so has become complicated. It was not until February 2014 gives the federal government the cost increase to: instead of planned 125 million euros, the machine will now cost 175 million euros, an increase of 40 percent.

     On 14 October 2014 the sun shines over Sevilla, hardly any wind, isolated cumulus clouds. In the early afternoon Thomas Wilhelm sitting in the cockpit of the first A400M for the Air Force. He and his crew, a co-pilot and four engineers, ready for its first flight. Start time: 14.30 clock. 20 km cable must now work 2000 computer systems. Fear? Discomfort? No. "Time to think about feelings, is not a" Wilhelm says later.

     At exactly 14.30 clock takes off the machine. Pilot honor.

     William controls the aircraft to the south, via Malaga across the Mediterranean, "restricted flight zone" in a. If the machine crashes, it should take no residential area.

     The crew is testing the systems. 130 pages of minutes they have to work off. It tests before

everything that makes the plane, if something does not work. William and his people to switch from hydraulic systems, see if the two parallel systems start. Only turn one and then the other engines and observe how the airplane responds.

     It responds well. The machine behaves exactly as planned the engineers. To 19.28 clock Wilhelm lands back in Seville. It fixes the propeller of a button? No, there is not this function.

     The technicians on the ground form a guard of honor for the crew. William holds in one hand his pilot bag, with the other he claps his hands off. Now that the stress falls, he noted that he was under stress. Later he says: "If something goes wrong, I can not pull over just right."

     For Wilhelm, a full circle, from his days in the Transall, the endless development time, the hours when everything was on the edge. "The guys in the Air Force will get an excellent aircraft," he says.

     The auditor of the Bundeswehr Technical Center see it differently. On November 10, they travel to Sevilla and are disappointed in the cockpit after a few minutes. Control panels are loose, wiggle wall panels, screws are not tightened, dirt everywhere. The cockpit had "presented in a total of extremely poor condition," write the auditors in the internal handover protocol.

     They suggest that the technicians of

Airbus tighten everything, then the test will continue. The technicians refuse. Crisis meeting. The Germans say that the quality management in the work "obviously does not work or does not exist". That is what the handover protocol.

     The examiners note 875 defects. Mold in the kitchen sink leaked hydraulic oil to the main chassis and to the tires, missing insulation of electric cables, bad paint on the tail rudder. Since they are German, they noted "lack of cleanliness" in the hall. The tool is not properly labeled. Their conclusion: "Airbus seems to be a serious problem with his understanding of product quality to have."

     And there is still a problem. As the Defense Minister of the participating nations could build the machine after the civil registration process, they may initially make no military flights. You may refrigerators ship, but not issue a paratrooper. Now big bureaucrats art is required.

     To take into account is the Joint Service Regulation 19/1. Responsible is the Bundeswehr Technical Center 61. To accomplish: to make up for the type certificate. Under the provisions would have an official monitor the final assembly of each A400M for the Air Force in person. But it was no one there when the first machine was assembled. How can you straighten it? It's about magic, technical authorities.

     In desperation officials devise a

"Virtual national military aviation authority to operate the A400M". Has now become, ultimately, with 400 professionals have their desks in a former barracks in Cologne-Wahn from the fixed idea "the Aircraft Office of the Armed Forces". You should solve the problem once and for all admission.

     Also Ebbers is involved. Because of approval

sungsprobleme has his team in recent months met 21 times. "Sometimes you went to three and four steps back," says Ebbers. "As you sit at a round table, and everyone has opinions on everything."

     The officials finally have an idea. To access a dubious maneuvers and transmit the examination of the machine kurzer-

hand the colleagues of the Spanish Administration. Thus, the first copy for the Air Force end of last year can fly to Wunstorf, ask the Spaniards of the machine from a transfer admission. For the first test flights in Germany, the machine receives a conditional approval.

     But there's a problem: the maintenance. End of October 2014 Read the members of the Budget Committee is an amazing number in the documentation for the A400M: The maintenance contract with Airbus has an estimated total of 645.5 million euros. The MPs turn on the Federal Court.

     Its quick analysis shows that the maintenance contract even more the monopolist Airbus delivers the State. "The rights of the Bundeswehr in terms of integrating their own staff are not adequately described," criticizing the auditor. It is not sufficient ensured that the Bundeswehr "by building knowledge the function of the Contractor" Reduce. Overall, the contract had failed inconvenient, too expensive, too much risk for the federal government. As before.

     In addition, the auditor complain that the project management had delivered a report on the status of the project since April 2014 due to "staff shortages". This is "risk management" has been weakened.

     However, the Federal Court agrees, otherwise the "initial flight mode" is not possible. The blackmail still works.

     The sad story of the A400M continues. The dominance of industrial policy objectives, unrealistic price expectations in the policy, the monopoly position politically produced by the manufacturer, its priority for civilian customers, the lack of control, bureaucratic procedures, the tangle of responsibilities and the friction between public authorities and companies - has everything on this and other . disasters out

     as Ursula von der Leyen in December 2013 Defense Minister will, she hears a warning often: If you fail in this office, then to an armament projects. Since von der Leyen has no interest in such a course, she cleans up quickly. Who is currently in charge of armor, his post soon has to acknowledge the Secretaries of State Rüdiger Wolf and Stéphane Beemelmans, the department head Detlef Selhausen. Industrial policy interests should take a less important role in the future according to the will of von der Leyen. "To keep important technologies in Germany and to promote is correct. Nevertheless, the military interests behind it must not stand back, "says von der Leyen. "The Bundeswehr with their equipment a job and is at its partners in the Word."

     A few months after taking office assigns the Minister a consulting contract to the auditors of KPMG, the job: the structural weaknesses of military projects to find out the risk management and controlling improve .

     In August von der Leyen makes the company

Technicians for maintenance of the A400M in Wunstorf mold in the kitchen sink (MAURICE WHITE / THE MIRROR)

take consultant Katrin Suder Secretary of State. At McKinsey is Suder has earned a reputation as a competent and rigorous reformer. She is taking her colleagues Gundbert Scherf with the Ministry.

     end of December sits Scherf, horn-rimmed glasses, waisted jacket, the Ministry of Defence and drawing with a pencil on the structures with which a disaster is to be avoided like the A400M. "So far, the project had to overcome seven hierarchical levels to arrive at the Secretary of State," says Scherf. He thwarts the seven lines from the bottom to the top. "As of now, is additionally directly."

     Scherf and have the external consultants

detected after several conversations that project managers are the most important people in the armament projects. "They have great skills and are committed to the success of the project," says Scherf, "these people we need." One of them is Ronald Ebbers.

     Once a month he makes now Suder and Scherf and reports on the progress of the A400M. Especially exactly he reported if there is no progress. And he does not have to wait until his appointment when things go bad. "The Secretary of State has said, here is my e-mail, please write to me directly," he says. Ebbers looks incredulously. He has never seen anything like it. "Here now blowing really an appreciable difference," says Ebbers.

     But still does not bear the plane. Shortly before Christmas 2014 grill the A400M for those responsible at Airbus Bernhard Gerwert and Chief Financial Officer Harald Wilhelm. You have to admit that the hull is still causing problems. You have to admit that other components can not be ready in time. The apparatus for dropping cargo comes later than expected.

     As Airbus Chief Enders hearing about it is acidic. His company had already paid on top of more than one billion for the A400M, and now it will even more. All lose in this project. The Minister, because they now have to live any longer without the A400M. "I expect that the Group uses all the levers to the impact of the company's internal problems of the Bundeswehr to keep as low as possible

th "says von der Leyen.

     The Minister has begun to purify the bureaucratic procedure, but that is no liberation. The state remains a monopolist delivered, the price could rise further as long as Airbus rumwerkelt to the retrofits. Also Minister von der Leyen is still agonize over this project. And for the next few mishaps they will be responsible.

     Last Tuesday opens in Wunstorf, Lower Saxony, at the airbase of the Air Force as a heavy iron door marked "room 0.44 - Hangar A400M". Here is the first transport Airbus Bundeswehr Tactical Plate 54 + 01. The wings extend through the entire hall, front towers above the thick black nose almost to the wall. The plane looks a bit chubby.

     It is pleasantly warm in the hall, all materials should be tested under conditions comforting. Operational test, the final hurdle. On a stage mechanic screw on the wings through the window of the cockpit looking for a soldier eye contact with a comrade, cowering under the aircraft.

     The ground is free from dirt and dust, you are in Germany. Bright spotlights illuminate every corner of the hall. From inside the machine enters a monotonous whistling in the hall, which hardly seems like an airplane hangar at this moment. It acts like a giant hospital room in which a particular patient is treated, a patient in Federal

Test pilot William "I can not pull over" (LUKE SCHULZE / PICTURE ALLIANCE / DPA)

Armed Forces Gray, needs a lot of help and you want to save anyway. * In an A400M at the International Aerospace

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