EU Opposition To Boeing/McDonell Douglas Merger Draws Quick Fire

European Union officials are expected to meet in Brussels, Belgium on Wednesday where they have signaled that they will most assuredly vote to reject the nearly $14 billion Boeing Corporation-McDonell Douglas merger that was announced in December, 1996 (see Bulletin, Vol. 3, No. 43) and approved by the Federal Trade Commission just last week.

Word that the EU will block the merger drew a swift and emphatic vote by the U.S. Senate Wednesday evening which unanimously approved a measure condemning the EU. Thursday, President Clinton weighed in on the matter, stating at a White House press conference that "[w]e have a system for managing this through the World Trade Organization and we have some options ourselves when actions are taken by Europe in this regard." Clinton stopped short of stating that a costly trade war was in the works, however.

Rep. Ron Packard (Oceanside) commented to Reuters that the FTC found no problem with the proposed consolidation, and added, "The EU is simply holding this merger hostage for a sweeter deal."

As reported in last week's Bulletin (Vol. 4, No. 24), European officials have complained about the consolidation of the Seattle-based Boeing and St. Louis-based McDonell Douglas into one entity because the new Boeing would likely stake out 70 percent of the large commercial airline market, leaving the four-nation Airbus Industrie consortium with the remaining 30 percent. In particular, the EU officials have criticized Boeing's contract to be the exclusive supplier of jets to Continental, American, and Delta airlines, a deal that the EU claims violates antitrust and competition laws.

The nearly $14 billion merger could have a substantial impact on California. McDonnell Douglas' Long Beach operation, Douglas Aircraft Co., has been troubled of late and some industry observers are predicting that the business may continue to deteriorate unless purchased by the Boeing Corporation. Some aerospace analysts even believe that the Boeing Co. may likely expand operations at the 20,000-person production plant in Long Beach, and possibly also expand work at McDonnell's 5,600-person space operation in Huntington Beach. In all, 42,000 of the 200,000 employees of the proposed new Boeing Co., are located in California, which would make Boeing the largest private industrial employer in the state, a title many think it would be unwilling to compromise.

Volume 4, Bulletin 25, July 17, 1997