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Boeing deal worries Europe
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July 21, 1997: 8:42 p.m. ET
European Commission threatens to block McDonnell Douglas merger
From Correspondent Casey Wian
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LOS ANGELES (CNNfn) - The $14 billion merger of Boeing and McDonnell Douglas already has been cleared by the Federal Trade Commission, but the agency's European counterpart is poised to block the deal this week.
The European Commission is concerned about the merger because Boeing does a significant amount of business in Europe, and the merger could hurt Boeing's main competitor, Airbus Industrie.
Boeing has about 60 percent of the global commercial aircraft market, and McDonnell Douglas holds about four percent. Airbus has most of the rest.
"We're actually treading on some new territory because certainly nobody wants this to develop into a global trade war," said Jon Kutler, president of Quarterdeck Investment Partners. "What they could do in order to enforce any type of mandate on the merger is do things like levy fines."
Former U.S. Trade Representative Carla Hills said the European authority can severely penalize Boeing.
"They can fine Boeing under their domestic law up to 10 percent of their revenues, which would be a hefty fine of up to four billion dollars," Hills said.
The penalty could be enforced by impounding Boeing planes at European airports or by fining European airlines that purchase Boeing jets.
The Clinton administration has threatened retaliation if the EC takes action against Boeing.
"My sense is that the [European Commission]'s grievances or the things that they would like fixed are the kinds of things that Boeing may be able to find a way around as long as the [EC] doesn't get too unreasonable," said Joseph Campbell, an aerospace analyst at Lehman Brothers.
One way out of the dispute could be for Boeing to limit its practice of locking up airlines with exclusive purchase agreements. Another could be to put McDonnell Douglas's commercial jet facility in California up for sale.
Another option is for Boeing to stand firm. Any action against it would also hurt European airlines and passengers taking Boeing jets.
Neither Boeing nor U.S. trade officials would comment on the dispute. 
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