Newspaper article The Evening Standard (London, England)

Messy Legacy of GE Chief's Merger Miscalculation; City Comment

Newspaper article The Evening Standard (London, England)

Messy Legacy of GE Chief's Merger Miscalculation; City Comment

Article excerpt


UNLESS General Electric withdraws its $42 billion ([pound]30 billion) takeover offer for Honeywell, the European Commission is expected today formally to back Competition Commissioner Mario Monti's decision to block the deal. And a good thing too. The evidence was overwhelming that GE would have tried to use Honeywell's avionics capacity and its own leading position in the financing and manufacture of jet engines to weaken competition in an already highly-concentrated market.

But what a mess this abortive mega-bid will leave behind. In an impressive analysis yesterday the Wall Street Journal painted a picture of Honeywell, which itself merged almost two years ago with industrial conglomerate Allied Signal, as a company in crisis. Before the deal with GE was struck, Honeywell was suffering not only from a slump in some of its key (formerly Allied Signal) businesses such as car parts and specialty chemicals, but also from a clash of cultures at the top.

Allied Signal boss Lawrence Bossidy, himself a former top GE executive, was running a company that focused on short-term earnings while Honeywell, headed by Michael Bonsignore, believed in building long-term customer relations with the likes of Boeing.

The intervention of GE appears to have made things worse. Even before it was the legal owner, GE seems to have been calling the shots at Honeywell in the belief that the transaction was a done deal.

With US antitrust authorities bowing to the political clout of GE's chief executive Jack Welch and waving the merger through, it must have looked just like that. Welch, it seems, gave too little thought to the fact that Europe has its own competition laws.

Welch has tried to bully the European Commission into rolling over like Washington's competition authorities, even getting President Bush to raise the issue at the Gothenburg summit last month. …

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