European aerospace and defence chiefs warned on Thursday the euro's strength was biting ever deeper into industry margins and said they would raise concerns in talks with the European Central Bank this month.
The warning came as the ECB announced a widely forecast interest rate increase of 0.25 percentage point to 4.25%. Expectations of the move have in recent weeks pulled the euro close to a record high of just over $1.60.
Aerospace and Defence Industries Association of Europe (ASD) President Ake Svensson said the euro had been worth just $1.16 in June 2003 and its unstoppable rise had made European exports more expensive in sectors typically priced in US dollars.
"Each ten cents devaluation of the US dollar against the euro produces a loss of margin of €1bn to major companies such as Airbus," Svensson, also Chief Executive of Sweden's Saab AB, told a news conference.
"We are planning for a meeting with the ECB on this issue. We can present the facts about the impact (of the rising euro) on our industry," he said, adding the meeting was scheduled to take place later this month.
Aside from the impact on giants such as EADS-owned plane-maker Airbus, Svensson estimated a ten-cent fall in the dollar against the euro cut a further €500m off margins across the industry supply chain in euro zone countries.
"Manufacturing companies have alighted on the only available remedy to currency volatility, which is to commit to new production facilities in North America or in emerging Asian countries," he said of ASD data showing that permanent jobs in the European sector fell 0.5% to 634,600 last year.
Svensson said he saw no simple solution and aerospace chiefs acknowledged that, beyond presenting their concerns to the Frankfurt-based central bank, there was little chance of immediate action from a body focused on tackling high inflation.
France, which has long pressured the ECB to stop the euro's rise by cutting rates, became on Tuesday the agenda-setting president of the European Union for the next six months.
Yet French officials say they plan no initiative on the euro exchange rate this year and have said the main problem is the attitude of the Americans and Chinese, whom they suspect of keeping their currencies undervalued on purpose.
ASD Deputy Secretary-General Luigi Longoni said the industry sought to counter the impact of foreign exchange volatility with currency hedging, but the extent of the euro's rise made such operations expensive and not fully effective.
By Dale Hudson and Mark John, Reuters
