Boeing chief calms merger fears

Date: 06/03/1997

By Tim Jones and Chris Johnstone

EUROPEAN regulators have nothing to fear from the 10-billion-ecu mega-merger of the world's biggest civil aircraft manufacturer Boeing and leading defence aerospace company McDonnell Douglas.

This will be the message from Boeing chief executive officer Phil Condit when he meets Competition Commissioner Karel van Miert in Brussels next week.

“I intend to say 'this is what we are doing and why we are doing it',” said Condit in an interview with European Voice. “If that addresses their concerns, then great, but I will also do some listening.”

In December, Seattle-based Boeing stunned the cut-throat world of aircraft manufacturing by announcing plans to buy McDonnell Douglas.

If the merger goes ahead, Boeing - which already has a 60&percent; global market share in sales of civil aircraft - will become a major presence in the manufacturing of fighter planes and helicopters, and would challenge Lockheed Martin for first place in the US defence market.

More worrying for the EU, Boeing's hand will be further strengthened against Airbus Industrie - the consortium of German, French, British and Spanish manufacturers which is the only serious rival to Boeing in the global aircraft market. Only this week, Boeing revealed that from the end of the year, it will produce 40 civil aircraft every month, the fastest pace of output in the company's long history.

Van Miert has already made it obvious that the merger could face regulatory obstacles before it is cleared.

Condit is puzzled by the worries about his firm's dominance. “We have more than credible competitors in each segment of the market,” he said. “In the defence and space business, there is Lockheed-Martin and the Raytheon-Hughes combination and I can see a number of companies in Europe with that potential for coming together.”

Condit points out that the Ariane space consortium already has a 60&percent; share of the growing market for launching satellites, and adds: “We are still not the strongest player in that market by any means, and Airbus is a more than adequate competitor on the commercial side.”

Moreover, McDonnell Douglas has been singularly unsuccessful in civil aircraft production and only has a 3&percent; global market share.

Although Van Miert has been less than forthcoming about his concerns, they are assumed to focus on the strength the newly combined company would have in negotiations with its components suppliers, some of which are based in the EU.

Condit questions the assumption that Boeing/McDonnell Douglas would corner its suppliers, obtain sweetheart deals and even strong-arm sub-contractors out of doing business with Airbus or other rivals.

“For a start, you cannot do that,” he said. “We all have strong suppliers but part of their strength is that they supply other people. If they are going to keep down their costs, they need a global market-place. We have an interest in ensuring that they have broad markets rather than trying to narrow them down to us.”

In fact, says Condit, the days of national companies are coming to an end. Boeing is already aiming to disperse production away from its Seattle base and hopes to be a truly global company by 2016.

The firm is even considering a serious move into the European market. “We will continue looking to do that, maybe, through a route like joint ventures. Over time, I would expect that we would see working in and around and through Europe as a major part of our business,” said Condit.

Even more surprisingly, he would consider working with arch-rival Airbus on development of the new generation Super-Jumbo - a project which Boeing only withdrew from two months ago.

“We tried that once and I would be willing to try again,” he said.