The short circuit at Airbus has turned out to be much more serious than expected. For several months, officials at the giant aerospace company have explained away the delays dogging their biggest project, the €12 billion superjumbo A380

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nginx/1.14.0 (Ubuntu) plane, by blaming the wiring. Each A380 has about 500 km of electrical cables that need to be configured individually for different customers (so the explanation went), and that was proving far more complex than anticipated.

Last week, the story changed. Airbus postponed the A380's launch once again, but acknowledged that the company's problems are far greater than mere technical snafus. The two-year delay to the A380 will reduce profits by an estimated €4.8 billion over the next three years and cut free cash flow by €6.3 billion. Airbus and its parent company, EADS, do indeed have a wiring problem — but it's one that has afflicted the companies' management structure as much as the guts of the planes themselves.

Airbus, a four-nation consortium backed by millions of euros of taxpayers' money, was once hailed as a model of European industrial cooperation. In fact, its structure, which distributes management and blue-collar jobs among its various state and private owners, has turned Airbus into a nightmare of corporate governance. It has become an enterprise in which political considerations carry more weight than commercial ones, where horse-trading trumps industrial efficiency, and where the national interests of its partners are balanced so carefully that many operations are needlessly duplicated. "It's very hard for Airbus to free itself from political strangulation," says Ulrich Horstmann, aerospace analyst at Munich, Germany-based Bayerische Landesbank.

Christian Streiff, who took over as Airbus chief executive in July, is now trying to wriggle out of that choke grip. Last week, the board of EADS, Airbus' parent, signed off on his sweeping restructuring plan to replace political bargaining with industrial logic. Streiff says that Airbus urgently needs to become a more closely coordinated company, but that's a long-term undertaking. "Integrating Airbus will remain an issue for the next decade," he said. "The cultures will have to continue mixing, and that takes time." It's not clear that Streiff will stick around that long; according to French media reports that the company denied, he last week threatened to quit in an apparent power struggle. If he does stay on, his plan will involve challenging several corporate taboos. The biggest: Streiff aims to end the practice of parceling out work by country in order to safeguard local jobs. It's a policy popular with politicians and unions, but one that eats up hoards of cash and causes logistical headaches as half-finished parts of aircraft are shuttled across Europe.

The wiring snafus are a hair-raising example of what can go wrong with this system. Airbus salesmen were so eager to win orders for the A380 that they offered to customize the interiors. Bespoke tailoring might be good business on London's Savile Row, but it's a huge complication for heavy manufacturing. And the task was made harder by duplication. Airbus facilities in Toulouse, France, and Hamburg, Germany, both work on the plane, but their software is not always compatible. Streiff admitted to employees last week that the design tools for wiring "could not keep pace with the rest of the program." Management communication is also poor. Leaked minutes of an EADS audit committee meeting last May, for example, show senior executives contradicting each other and giving highly divergent opinions about how long or serious the delays were likely to be. Streiff is hoping to address these issues head-on, not just because he is new both to Airbus and to the aerospace industry (he's a manufacturing expert from the French glass company Saint Gobain), but also because the company is facing its biggest crisis since its founding in 1970. The company has slashed its delivery schedule for the A380 from one plane in 2006 to zero, from nine planes in 2007 to one, and from 25 planes in 2008 to 13. That's a significant setback for the behemoth's main customers, including Emirates and Singapore Airlines, which now must revise their expansion plans. They are expected to demand compensation and may even cancel their orders. Emirates, the single biggest customer with orders for 45 planes, said it is "reviewing all options."

Streiff's revitalization plan is supposed to make Airbus a more reliable and efficient partner. It seeks to cut two years off the time it takes to develop a new aircraft, boost productivity by 20%, and slash €2 billion in manufacturing costs annually. The company will negotiate the cuts with union and political leaders in its 16 different manufacturing locations in four countries, but that is already creating turbulence. French and German politicians and union leaders quickly weighed in with objections. In Toulouse, Airbus executives blamed Hamburg for the delays. Hamburg city officials, in turn, blamed EADS management in Munich.

With so many clamoring stakeholders, any would-be Airbus reformer has his work cut out. EADS co-ceo Thomas Enders met with Germany's Economics Minister, Michael Glos, last Thursday, and promised him that Airbus wasn't looking for mass layoffs of blue-collar workers, but for administrative streamlining. His reassurances didn't stop calls in Germany for the government to take a big stake in EADS to counterbalance the 15% owned by the French state. (The two other big owners are Germany's DaimlerChrysler and France's Lagardère group, both of which reduced their shareholdings this year; Britain's BAE is currently selling its 20% stake in Airbus to EADS.) Giovanni Federico, a professor at the European University Institute in Florence, Italy, says, "Because of the politics, Airbus certainly won't be able to carry out the sort of cost-cutting that a U.S. firm would now do." Indeed, archrival Boeing has cut more than 50,000 jobs over the past eight years.

The 555-seat, double-decker A380 is not just another airplane. It is one of those bet-the-company ventures, so beloved by the airline industry, which either succeed spectacularly — as the Boeing 747 did — or risk sending the whole firm into a tailspin. Mechanically at least, the A380 works: Airbus has been conducting successful test flights for over a year. Horstmann, the Munich bank analyst, reckons there's an 80% chance that Airbus will be able to work through this crisis and bounce back in a couple of years. "But there is a danger it'll get sucked into a vicious circle of job cuts, sinking morale and political infighting," he worries.

Already stretched by the A380 crisis, Airbus must decide whether it has the money and management to proceed with developing the 330-seat A350 in a bid to catch up with Boeing's new 787 Dreamliner, or focus elsewhere. Steve East at Credit Suisse First Boston in London, who downgraded EADS stock to "underperform" last week, thinks the company will cancel the €8 billion A350 program altogether.

It's all a huge change from the triumphalism at Airbus headquarters — and European capitals — two years ago, when the firm outsold Boeing for the first time. Back then, Airbus was hailed as a uniquely European archetype for competing in heavy industries. After all, no single country in Europe has the resources to develop a world-beating aircraft manufacturer on its own. The core notion of cooperation is still valid, says James Foreman-Peck, a professor at Cardiff Business School who specializes in European industrial policy, "but these days, Airbus just confirms Anglo-Saxon prejudices that governments waste large amounts of taxpayers' money even when they have a good idea." Untangling Airbus' wiring will prove plenty tough, but untangling its management snarls may be the hardest task of all.

• PETER GUMBEL | PARIS
• With its new superplane badly delayed, Airbus scrambles to keep up with Boeing