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Friday, 15 June, 2001, 15:42 GMT 16:42 UK
US Senators lash out at EU over GE deal
A US Senator has said the US may retaliate against the European Union (EU) if it fails to approve the merger of General Electric and Honeywell International.
In a letter to European Commission (EC) vice president Loyola de Palacio, Senator John Rockefeller, a Democrat from West Virginia, said, "If it appears that the European Commission is unfairly blocking mergers between US companies principally to protect the position of European competitors, then the subcommittee will need to re-examine the open market the US has maintained for [aerospace] acquisitions."
Sources say the EC has recommended that the EU reject the merger $42bn deal because concessions made on the part of GE failed to meet EC demands.
In his letter, Senator Rockefeller said the EC's review of the merger "will raise serious concerns among Americans about whether this review has been conducted with fairness and neutrality."
Mr Rockefeller also wrote that US officials will "explore what might be the most effective US response if the fairness and openness we have historically extended to the European aerospace firms is not being reciprocated."
Gramm weighs in
The controversy caught the ire of another senator, Republican Phil Gramm of Texas.
In comments made during testimony by Federal Reserve chairman Alan Greenspan, Mr Gramm lashed out, saying that he questions "the logic of their environmental policy, their regulatory policy, and my concern is that we don't end up having bad policies imposed on us as Europeans try to protect themselves against competition when they've lost competitive edge based on their policies¿"
The $42bn (£30bn) deal between the two companies remains on the brink of collapse after GE revealed that it was not prepared to meet the commission's "extraordinary demands".
The news catapulted the wide disparity between the US and EU competition authorities into the spotlight.
President George Bush during his first trip to Europe last week was the first to speak out against a possible EU veto of the merger, moving the merger debate into the political arena.
"I am concerned that the Europeans have rejected it," Mr Bush told journalists when asked about the pending failure of what would have been the largest ever industrial acquisition.
It became evident that a US-EU row was brewing on Thursday when a White House official confirmed that Mr Bush may raise the issue at his meeting with EU leaders in Sweden.
But the EU had already rejected the intervention of the White House in its decision making process.
The deal, agreed by Honeywell and General Electric in October, was approved a month ago by US anti-trust investigators.
But the European Commission holds much more deep-seated reservations about the merger, fearing that the combined group would hold too high a share of the world's aerospace markets.
The proposed divestitures offered by GE and Honeywell fell far short of the commission's demands.
"GE is not optimistic that its proposal will meet with European regulatory approval," said GE in a statement.
"The European regulator's demands exceeded anything I or our European advisors imagined, and differed sharply from anti-trust counterparts in the US and Canada," he added.
A source close to the deal said the GE team left Brussels on Thursday and reportedly considered the deal "effectively dead".
Mr Monti expressed "regret" at the companies' position, but said his office would continue to review the deal "unless the merger notification is formally withdrawn".
And the EU has left the door ajar by granting "limited opportunity to submit modified proposals".
The EU has until 12 July to decide whether to block the deal.
Both Honeywell and General Electric are among the elite of firms listed on the world's most-watched stock market index, the Dow Jones Industrial Average index.
But while General Electric, the world's largest jet engine maker, and owner of brands such as Hotpoint, has continued to prosper despite the time taken to win takeover approval, Honeywell has found the delays harder to cope with.
Honeywell, manufacturer of products ranging from security systems to aircraft electrics, in April revealed profits down 91%, and announced it was to cut 6,500 jobs.
The firm blamed its decision to hold onto underperforming businesses while the takeover process continued for much of the profits slide.
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